ESPP tax calculator.

An employee stock purchase plan buys company shares at a discount, and the tax bill depends on when you sell, not when you buy. Sell soon and the whole discount is taxed as wages. Wait long enough and only part of it is. This calculator takes the numbers printed on Form 3922 and your sale price, decides which kind of sale you made, and shows the ordinary income, the capital gain or loss, and the basis to report.

How this is calculated

Publication 525 says you meet the holding period requirement if you do not sell until the end of the later of the 1-year period after the stock was transferred to you or the 2-year period after the option was granted. The tool takes the later of those two dates (from Form 3922 boxes 7 and 1) and calls the sale qualifying only if it falls after that date.

Qualifying sale. Where the option price was less than 100% (but not less than 85%) of the share value at grant, you report as compensation the lesser of (a) the grant-date value minus the option price and (b) your actual gain over the price paid. Any remaining gain is capital gain, and a loss is a capital loss with no ordinary income. Form 3922 box 8 is the exercise price figured as if the option had been exercised on the grant date, which is what the rule needs.

Disqualifying sale. Ordinary income is the value of the stock at exercise (box 4) minus the price paid (box 5). Publication 525 notes that this income is not limited to your gain on the sale. It is added to your basis, and the difference between that higher basis and the sale price is capital gain or loss. As of 2026-10-26 the rules are taken from Publication 525 (2025) and the Instructions for Forms 3921 and 3922 (04/2025). The tax estimate multiplies the ordinary part by your ordinary rate and a capital gain by either your long-term rate (held more than one year after transfer) or your ordinary rate.

Worked examples (hypothetical figures, real rules)

These use the same numbers as Examples 10 and 11 in Publication 525. 100 shares were bought for $20 each when the stock was worth $22 at grant and $23 at exercise.

Sold after the holding period at $30. The ordinary part is the lesser of the grant-date discount (100 x ($22 - $20) = $200) and the gain ($1,000), so $200.00 is wages. Your basis becomes $2,200.00 and the capital gain is $800.00. At 24% ordinary and 15% long-term rates the estimated tax is $48.00 plus $120.00, $168.00 in all.

Sold six months after exercise at $30. The sale is disqualifying: ordinary income is 100 x ($23 - $20) = $300.00, basis becomes $2,300.00 and the capital gain is $700.00. The estimated tax rises to $240.00 because the gain is short-term and more of it is ordinary.

A disqualifying sale at a loss. Sell the same shares at $19 and the ordinary income is still $300.00 (the exercise-date value minus the price paid), which creates a capital loss of $400.00. You owe tax on income that the sale did not actually earn.

Mistakes people make

• Using the wrong basis. Broker statements on Form 1099-B often show only the purchase price. If ordinary income was reported, add it to the basis on Form 8949 or you pay tax on it twice.
• Counting from the purchase date only. The test needs more than one year after transfer and more than two years after the grant date. Missing the grant-date limb is the usual surprise.
• Assuming a loss erases the ordinary income. In a disqualifying sale the ordinary part is set by the exercise-date price, not by what you sold for.
• Ignoring the pay-period timing. Publication 525 says the timing and amount of payroll deductions do not affect your basis.

Who this is for, and what it does not cover

It suits employees of a company whose plan reports ESPP purchases on Form 3922 and who have sold, or are choosing when to sell. It covers a single purchase lot at a time. It does not cover options that are not statutory ESPP options, plans outside the 85% to 100% grant pricing limits, the alternative minimum tax, state tax, the 3.8% net investment income tax, or the wash sale rules.

Sources

Retrieved 2026-10-26. Each link was opened and checked against the claim next to it.

• IRS Publication 525 (2025), Taxable and Nontaxable Income: the employee stock purchase plan section: the holding period requirement, the lesser-of rule for qualifying sales, ordinary income and basis for disqualifying sales, and Examples 10 and 11.
• IRS Instructions for Forms 3921 and 3922 (04/2025): the Form 3922 box list, including box 8, the exercise price as if exercised on the grant date.
• IRS Topic no. 427, Stock options: options under an employee stock purchase plan are statutory stock options.