Tax tip for Employee Stock Purchase Plan (ESSP)
Tax tip for Employee Stock Purchase Plan (ESPP) allows employees to use after-tax wages to purchase stock in the company they work for at a discounted price. Thus employees pay to participate in ESPP. However, in an ESPP, employees purchase stock with their own after-tax wages and pay capital gains taxes when they sell their shares.It provides discount between 0% – 15%. There is no AMT at the time of purchase. You need to purchase these shares within the company offering period (normally 5 years). Under ESPP, even if you hold your shares for more than a year, still part of your profit can be ordinary income.