Employee stock program?

[GUNnROD]

The company I work for has an employee stock purchase program that I am enrolled in. Now that it is getting close to the end of the year. Soon I will have company stock in my hot little hands. But I know there are some tax rules that apply differently depending on how long you hold them before selling and taking the profit.

I was hoping someone here might be able to shed a little light on that for me.

Thanks in advance.

[flatscat1]

These are long shares of stock, not options, right? Each plan can be a little different, so check with your tax advisor (cpa) or plan sponsor to clarify. In general, if you hold stock (or most investments) for one year and one day, you are taxed at long term capital gains/losses on the appreciated/lost amount. This is 15%.

If you hold the stock for less than a year and sell it, it is short-term capital gains which will likely be your ordinary income tax rate. So if you pay more than 15% on your taxes, and who doesn't, you should think about the timing of your stock sale. That is, as long as you think your company is doing ok and you don't need the money for an immediate need/opportunity cost and you aren't over concentrated in that particular stock.

Your particular plan may also have vesting restrictions, which you will need to consider.

Good luck.

[GUNnROD]

The way this program works is a certain percentage of my paycheck is collected throughout the year. That money is then used to buy company stock in the month of January. The price I get to purchase it at is the lesser of the previous year Jan. 1st or Dec 31th stock price less 15%. It is at that time owned by me, no vesting period.

So it looks like tax wise it's better to hold it for more than a year. But if the price has a peak before then I will probably dump it and take the tax hickey.

Thanks.

[Texas Bill]

I've been at my company for 5 years now and always participated. We buy every 6 months. After a buy, I go and sell my 13 month old stock at 15% tax and just rotate it like income.

[MikeV]

Long term capital gains are taxed at either 5% or 15% (for the most part) depending on your tax bracket. There can be a lot of other issues, depending on what else is in the return. Even though the tax rate on capital gains is low compared to ordinary income, there are other items that capital gains can impact. Among these are: increase the amount of your social security benefits that become subject to tax, reduce your allowable itemized deductions, reduce the amount of your personal exemptions, reduce or eliminate your allowable traditional IRA deduction, reduce or eliminate your allowable education tax credit, tuition and fees deduction, child tax credit, cause passive activity losses to be suspended, and in the right situation allow the alternative minimum tax to kick in (by reducing your alt-min exemption amount).