In the current market, is it advisable to hold to take advantage of long term capital gains rate or sell for a sure 15%(minus income tax)? I am interested in hearing what you do for your ESPP. I understand that the strategy may depend on your company’s future outlook.
I didn’t know that. So all profits are treated as ordinary income irrespective of how long you hold them?
You’re taxed on the 15% discount as income. Then you are either taxes as long term or short term on the gains over your purchase price. They’re saying that tax as income on the 15% as soon as you get them. Then you can decide to sell or hold.
If you aren’t going all in on the espp, then you are doing it wrong. It’s free money for heaven’s sake! Just go all in and hold! Cut corners on other things if you have to.
We are all in on ESPP. The question is whether to sell immediately after purchase or to hold. Which strategy makes more sense in the current volatile market.
you owe regular income tax on the amount of the discount regardless of how long you hold
If you don’t have a look back period in your ESPP there is absolutely no tax advantage to holding as opposed to selling right away. If you do have a look back period and the stock went up during the period, you may pay less income tax on your discount by pretending that your discount was only off of the price at the beginning of the period instead of the end, if you wait the full two years. If you have a look back period and the stock went down during the period I think you should sell right away unless you know something about your stock that the rest of the market doesn’t. (Hint: you don’t.) Tl;dr: sell immediately.
Hold it all, then move out of California, then sell it in a different state. California doesn’t have capital gains tax rates. Your profits are taxed at your marginal rate (eg they’re treated the same as W2 income).
But they have a shitty state income tax.
Yeah that’s why I say to leave Cali before you sell