Employee Stock Purchase Plans (ESPP)

ESPP顾名思义就是公司offer 自己的股票to 员工at a discount price, knows as offer, or grant price.
员工在购买的时候，也就是大家知道的行权的时候，you donot owe any tax.
只有在出售的时候，需要根据三个要素分步骤计算tax liability：
1. the grant date
2. the exercise date
3. the profit make.
前两个要素将决定这个profit 是a Long term capital gain taxed at a lower rate, or a short capital gain which will be fully taxed.

A. Qualifying Disposition:
---at least 2 years after offering (grant date)
---at least 1 year after purchasing (exercise date)

report discount(discount* offering market price) as ESPP ordinary income at 1040 line 7
report profit of sale to Schedule D as LTCG.
=(sale at market price - cost at discount price - the discout taken at offering market price)

B. Disqualifying Disposition:
一般employer 会 report bargain element in your W-2 as ordinary income.

If less than 1 year of purchase
report bargain element (discount at purchasing price) included in W-2 as ordinary income
report profit of sale to Schedule D as STCG
= (sale at market price - cost at exercise market price)

If more than 1 year of purchase but less than 2 year of offering
same thing happen in first step but the profit will be reported in Schedule D as LTCG.

Please note ESPP will not subject to FICA and employer will not be required to withhold income tax for you. You pay tax based on your return.