this is the first time in doing my taxes that Etrade has all of my RSU/ESPP in columns with actual/adjusted. OMG is it so much easier than in the past when using turbo tax. Last year I remember I had to put in FMV, Purchase Date, Sell Date, Sell Date price, etc.
I always wondered about the following perhaps you could shine some light.
IRS says u can buy up to 25k of ESPP per year. I recently found out it is not 25k cost but 25k FMV. So if you have a stock initial offering period is $100 then at the close of the period is $50 you get to buy the stock for $45 if u get 10% off. But you can only buy 250 shares max per year. Tell me if I got that right or wrong.
Now here is the bigger q. I read that if u hold the ESPP for 18 months from offering period you discount you received in the example above $5 per share X 250 equals $1250. If you hold it to meet the requirement when you sell the stock for $60 you will pay long term cap gain on $15 per share X 250 = $3750 in gain. Now if you sell the stock before the 18 month offering period ends, your employer will report back the $1250 on your W2 where you will have to pay SSI, ETC. So same example, you sell the stock for $60. You cap gain will be i'm guessing $60-50= $10 multiple by 250 so $2500. you will get from your broker and the $1250 discount goes back on your w2 correct?
Even bigger question..... What happens when the stock falls and you sold before the qualified period? I'm guessing your company still reports the $1250 on your w2. What happens if the stock goes to $40? I'm guessing your actual cost is still $45 and u get to write off the $5 loss X 250 so u get to write off $1250 cap gain/loss but on the flip side you still have to pay SSI/ETC on the $1250 discount.
If someone can shed some light on this I would greatly appreciate it. I've always held my ESPP until after the 18 month period to avoid the additional taxes but with the market being so volatile I have been thinking about selling immediately but i'm worried I could be paying even more in taxes. traditionally i've treated the espp account as an extra savings account that I tap in to when I have something big I need to buy but i'm rethinking this now....
