ESPP calculator
An employee stock purchase plan lets you buy your employer's stock at a discount through payroll. Enter your plan, the share price and your pay to see what each purchase is worth, the tax on selling right away or holding until the sale qualifies, and the tax you will owe at filing, since nothing is withheld.
Quick answer: With a 15% discount and a lookback, an offering price of $50 and a purchase price of $60, you pay $42.50 for a $60.00 share, a 41.2% gain on cost. For a single filer earning $150,000 in a state with no income tax (176 shares), selling right away leaves $2,341 after tax, and holding until the sale qualifies at the same price leaves $2,499.
By John Crane, MBA & the Editorial Team · Updated for the 2026 tax year. How we check our numbers
Discount gain at purchase
$1,749
You contribute $7,500 and buy 176 shares for $7,480, worth $9,229 on the purchase date. That is a 23.4% return on what you paid before tax, helped by the lookback.
| What you paid | $7,480 | 81.0% |
|---|---|---|
| Discount gain | $1,749 | 19.0% |
- Shares bought
- 176
- Total cost
- $7,480
- Market value
- $9,229
- Effective discount
- 23.4%
- A plain 15% discount
- 17.6%
- Leftover contributions
- $20.00
The effective discount is the gain divided by what you paid. A 15% discount alone returns 17.6% on cost, because you pay 85 cents for each dollar of stock; the lookback adds more whenever the price rose after the offering date. Leftover contributions are amounts too small for a whole share (or blocked by the limit), usually carried into the next purchase or refunded.
Every purchase
1 purchase| Date | Market price | Price paid | Shares | Cost | Value | Discount gain |
|---|---|---|---|---|---|---|
| Jul 1, 2026 | $52.44 | $42.50 | 176 | $7,480 | $9,229 | $1,749 |
Price paid is 85% of the lower of the offering-date price and the purchase-date price. Contributions are 10% of salary, $7,500 for each 6-month purchase period. Nothing is taxed until you sell.
How this is calculated
Purchase price
Price = (100% - discount) x lower of offering-date and purchase-date price
Plans under IRC section 423 can discount the stock by up to 15%. With a lookback, the discount applies to the lower of the price on the offering (grant) date and the price on the purchase date; without one, to the purchase-date price only. Contributions buy whole shares. A plan can buy at most $25,000 of stock for each calendar year the offering is open, valued at the offering-date price, with unused room carried forward only within the same offering.
Qualifying vs disqualifying sale
A sale qualifies when it is more than 2 years after the offering date and more than 1 year after the purchase. Then ordinary income is the smaller of your actual gain and the discount figured on the offering-date price (15% of it), and the rest is long-term capital gain; a loss is all capital. Sell earlier and it is disqualifying: the full spread at purchase (market price minus price paid) is ordinary income even if the stock later falls, and only the change after purchase is a capital gain or loss.
Tax due at filing
Employers withhold no income tax, Social Security or Medicare on ESPP income (IRS Pub 525), so the tax shows up when you file. We figure it from the full 2026 federal and state returns: your salary and bonus as wages with the standard deduction, compared with the same return plus the ESPP income, so the ordinary part is taxed at your top rate and long-term gains at capital gains rates. Capital losses offset up to $3,000 of other income; larger losses carry forward and are not shown.
Sources
- IRS Publication 525, Taxable and Nontaxable Income (stock options, ESPP and RSUs)
- IRS Form 3922, Transfer of Stock Acquired Through an Employee Stock Purchase Plan
- IRS Revenue Procedure 2025-32: 2026 tax brackets, standard deduction and other inflation adjustments
- State revenue departments, via the Federation of Tax Administrators
Related guides
- How ESPP shares are taxedHow the ESPP discount and lookback work, why qualifying and disqualifying sales are taxed differently, and whether to sell right away or hold.
Questions
Is an ESPP worth it?
Usually yes. A 15% discount alone means paying 85 cents for each dollar of stock, a 17.6% return on what you paid, earned in months. A lookback adds more when the price rises: with an offering price of $50 and a purchase price of $60, you pay $42.50 for a $60.00 share, a 41.2% gain on cost. The main costs are cash tied up until the purchase and the risk of holding your employer's stock.
Should I sell ESPP shares right away?
Selling on the purchase date locks in the discount with little price risk, but it is a disqualifying sale taxed as ordinary income. In our example (176 shares, $150,000 salary, single, in a state with no income tax), selling at $60.00 leaves $2,341 after tax. Holding until the sale qualifies at the same price leaves $2,499, and holding still wins as long as the price on the qualifying date is at least $58.94. The question is whether the extra tax savings are worth up to two years of single-stock risk.
How is ESPP taxed?
Nothing is taxed when you buy. When you sell, part of the gain is ordinary income and the rest is a capital gain or loss. In our example, selling right away makes the whole $3,080 spread ordinary income, $739 of federal tax. A qualifying sale at the same price makes only $1,320 ordinary (15% of the $50 offering price per share) and $1,760 long-term capital gain, $581 of federal tax.
What is a qualifying disposition?
A sale more than 2 years after the offering (grant) date and more than 1 year after the purchase date. For a January 1, 2026 offering with a July 1, 2026 purchase, a sale qualifies from January 2, 2028. Any earlier sale, gift or other transfer is a disqualifying disposition.
Why does my W-2 include ESPP income?
When you make a disqualifying sale, your employer adds the spread at purchase to your W-2 wages as ordinary income, but withholds no income tax, Social Security or Medicare on it. Your broker's Form 1099-B often shows only the price you paid as your cost basis, so add the ordinary income to the basis on Form 8949 or you will pay tax on it twice.