Work out what your employee stock purchase plan is worth. Enter your contribution, the discount and lookback, and the share prices to see the purchase price, shares bought, instant gain and annualized return, plus how a qualifying or disqualifying sale is taxed.
Last updated:
Your contributions
$
% of pay
Most plans allow 1% to 15%.
%
Share prices
$
$
$
Same as the purchase price = sell right away.
IRS Section 423 cap, at the offering-date price.
Your tax rates
%
Federal bracket + state, e.g. 24% + 6%.
%
Federal 0/15/20% + state.
Enter your values to see the result.
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How to use the ESPP Calculator
Enter your salary and contribution % and the length of the purchase period.
Set the discount (often 15%) and tick lookback if your plan has one.
Enter the share prices on the offering start date and the purchase date, and the price you expect to sell at.
Add your tax rates for ordinary income and long-term capital gains.
Compare the results: instant gain, return, and after-tax profit for a quick sale vs. a qualifying sale.
Purchase price = (with lookback: lower of offering-date and purchase-date price; without: purchase-date price) × (1 − discount)
Shares = contributions ÷ purchase price, rounded down (also capped by the $25,000 limit)
Instant gain = shares × (purchase-date price − purchase price)
Annualized return = (1 + return)12 ÷ (months ÷ 2) − 1, because payroll deductions are invested for half the period on average
Example: $120,000 salary, 10% for 6 months = $6,000. With lookback the price is 85% of $50 = $42.50, buying 141 shares worth $8,460 on a $60 purchase date: an instant gain of $2,467.50 (41.18%).
Return from a 15% discount with lookback
Price change during the offering
Price you pay (start $50)
Purchase-date price
Instant return
−20%
$34.00
$40.00
17.65%
0%
$42.50
$50.00
17.65%
+10%
$42.50
$55.00
29.41%
+20%
$42.50
$60.00
41.18%
+50%
$42.50
$75.00
76.47%
A 15% discount always guarantees at least a 17.65% gain on purchase day (1 ÷ 0.85 − 1). The lookback adds upside when the price rises during the offering.
Qualifying vs. disqualifying sale
Disqualifying
Qualifying
Holding period
Less than 2 years from offering or 1 year from purchase
2+ years from offering and 1+ year from purchase
Ordinary income
Purchase-date price − price paid
Lesser of actual gain and discount at the offering-date price
Capital gain
Sale price − purchase-date price
Everything above the ordinary income (long-term)
Risk
Low if sold immediately
Share price can fall while you hold
This calculator taxes a disqualifying capital gain at your ordinary rate (short-term). If you hold more than a year but less than the 2-year offering test, the capital part is long-term instead. Tax rules are for US Section 423 plans; non-qualified plans tax the discount as wages at purchase.
Frequently asked questions
How does an ESPP work?
You contribute a percentage of each paycheck after tax. At the end of each purchase period the plan buys company shares at a discount, commonly 15%. With a lookback, the discount applies to the lower of the price on the offering start date and the purchase date.
How much is an ESPP with a 15% discount worth?
Buying at 15% off means each $85 buys $100 of stock, an immediate return of 17.65% if you sell at once. With a lookback and a rising share price the return can be much higher: starting at $50 and buying when the price is $60, you pay $42.50 for a $60 share, a 41.18% gain.
What is a qualifying disposition?
A sale at least 2 years after the offering start date and at least 1 year after the purchase date. Ordinary income is then limited to the lesser of the actual gain and the discount measured at the offering-date price; the rest is a long-term capital gain.
What is a disqualifying disposition?
Any sale before both holding periods are met. The spread between the purchase-date price and what you paid is ordinary income on your W-2, and any change after the purchase date is a capital gain or loss (short-term if held one year or less).
What is the $25,000 ESPP limit?
A Section 423 plan cannot let you buy more than $25,000 of stock per calendar year, measured at the share price on the offering start date (before the discount). Contributions above the limit are refunded.
Should I sell ESPP shares immediately?
Selling right away locks in the discount and avoids concentration in your employer's stock; holding for a qualifying disposition can lower the tax, but the share price may fall. Compare both after-tax results above with your own expected sale price.
Why is my cost basis on Form 1099-B wrong?
Brokers often report only the price you paid. The part taxed as ordinary income on your W-2 should be added to your basis, or you may pay tax on it twice. Check Form 3922 from your employer for the purchase details.
Are all the tools on FreeToolCabin tested for quality and accuracy?
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