Participating in an Employee Stock Purchase Plan is a great idea. The shares are typically offered for a discounted rate, brokerage fees are decreased, and they offer an excellent way to supplement your retirement savings. The only difficulty comes when it's time to sell those shares. Calculating your cost basis after selling stock bought through your ESPP isn't hard, but there are few things you have to have.
- Skill level:
- Moderately Challenging
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Things you need
- Statement from investment broker
- Statement showing your investment broker's commission schedule
- Quiet area to work
Request a copy of your investment policies and procedures from your Human Resources Department. This will show you the amount of broker fees and transaction fees that are being charged for company employees. Make a note of the number of brokerage fees, transaction commissions, and any administration fees that you have been charged.
Refer to your investment statement from the investment firm that handles your Employee Stock Purchase Plan. It will have a detailed list of the stock purchase that were made on your behalf. Pay close attention to the amount of money actually spent to purchase the stock in your portfolio.
Note the price paid for each share, and the total number of shares purchased on your behalf while on the plan. This allows you to begin formulating your cost basis calculation.
Add the total purchase cost of the stock, the brokerage fees, and commissions together. Subtract this number from the total current value of the stock at the time of sale. This will give you your total cost basis.
Tips and warnings
- When dealing with capital gains taxes, it is always a good idea to consult a professional. They are best equipped to calculate your tax situation, and keep you out of jail.
- Never, never assume that you can get away with not claiming your taxable gains.
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