You would most likely only have commissions if you were involved with a brokerage firm.
Usually, you make contributions to a stock purchase fund for a certain period of time through payroll deductions. At designated points in the year, your employer then uses the accumulated money in the fund to purchase stock for you.
In many plans, the price that you pay for the stock is the stock price at the time you started contributing to the fund, or the stock price at the time your employer purchases the shares on your behalf, whichever is lower, with a discount of up to 15%.
- Either way, you get to buy the stock at a price that's lower than the market price.
- Your discounted price is known as the offer or grant price.
When you sell the stock, the discount that you received when you bought the stock is generally considered additional compensation to you, so you have to pay taxes on it as regular income.
- If you hold the stock for a year or less before you sell it, any gains will be considered compensation and taxed as such.
- If you hold the shares for more than one year, any profit will be taxed at the usually lower capital gains rate.
Click here some for an article that explains the Disqualifying Disposition in full with examples.
Click here for a video from TurboTax on entering ESPP sales.
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