How to Calculate Capital Gains on an Employee Stock Purchase Plan

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Employee stock purchase plans, or ESPPs, provide employees with a way to invest in company stock by investing money withheld directly from their paycheck. Investing a percentage of salary on a regular basis like this can eventually lead to a sizable position of company stock. It can also make calculating the capital gains difficult. With so many stock purchases at so many times and so many prices, things can get out of hand quickly. Fortunately, with the right records on hand, the actual task of calculating the capital gains is relatively easy.

Collect employee stock purchase plan records. Employers, or the company that handles the stock plan, provide employees with quarterly or annual statements. These statements will contain the necessary data to calculate the capital gains on employee stock purchases.

Contact the employer, or stock plan administrator, if records are missing or otherwise cannot be found. Not only are the records necessary to calculate the capital gains on the employee stock purchases, but they are required supporting documentation should there be an audit or review.

Read the statement to determine if the report is actively calculating either the cost basis or the capital gain. This can make things much easier.

Calculate the basis. The first step in calculating the capital gains on employee stock purchase plans is determining the basis for the stock. The basis is the total cost of all shares of the stock, including all shares purchased by reinvesting dividends. Actually filing the tax forms will require entering each and every purchase, but it is not necessary to just calculate the capital gain.

Calculate the current value. Multiply the number of shares owned by the price per share. This is the current value of all the company stock held.

Subtract the basis from the current value. This amount is the current capital gain.

Tips & Warnings

  • See if the company that holds the account will generate a capital gains report for you. Many will not only generate such a report, but will also generate a report that can be used for Schedule D when filing your taxes.

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