ouch, stock price will approach this number soon
8 replies (most recent on top)
Anonymous139765, the calculator is actually not entirely correct. Use these numbers... Market price $65, lookback price $65, sale price $55, regular tax rate 29%. Capital gains: 15%...Investment $20k....Notice in the "short term loss" section it says -$3800
Regular income: $3529.41
Short-term capital gains: $-3619.91
That's not correct... You can only use $3000 of your capital loss to offset your regular income. Even though you bought and sold stock at $55/share, you still need to pay taxes on the ordinary income portion (less $3000). The remaining $619.91 you can only use to offset capital gains in some other stock/investment OR you have to carry that $619.91 loss over to next year's taxes. You will be taxed at $3529.41-3000= or you will be taxed for $529 in income on this stock transaction this year, even though you really didn't make anything buying and selling at $55/share.
this isnt an issue if you have no capital loss to carryover. But if you do...You are assuming your tax rate is the same in the year you sell and the year you can use your capital lose carryover...which is a big assumption that typically is wrong unless you happen to have a substantial negative change in next year's ordinary income (I guess for some of you that might me laidoff and unemployed of an extended period, then yes your capital loss you carry over to next year would be better for you since it might lower your agi below your current tax bracket
Oh, and if you don't believe me, ask Frank A.... :)
no, you will still earn some money.
Market price: 65$
Lookback price: 65$
Sale price: 58$
Regular tax rate: 28%
Long-term capital gains tax rate: 15%
========>Net profit: $358.37
And if the stock price really does fall to $55/share...and the espp purchase price is $55/share..you really did lose money....because you'll pay and ordinary income the year you sell, but your have to take your capital loss carryovers each year after if you don't have capital gains elsewhere..
In other words...uncle Sam taxman just screwed you over. Because they want you to pay taxes on all that gain between espp purchase price and the stock price the espp shares were given to you...but uncle Sam will limit how.much you can offset as a loss to $3000every year...
From a tax perspective, if you sell now you already have a capital loss if you sell your most recent espp shares and you have no other capital gains to offset this loss...you will pay ordinary income tax on the difference between the fair market price of our stock the day the shares were disbursed and the espp purchase price you paid. And then you will realize a capital loss between the fair market price of the date of disbursement of the espp shares and the price on the day you sell since current price is lower than the price the espp shares were disbursed. And the amount you pay in ordinary income tax and the amount of capital loss won't always cancel each other out. You are only allowed to deduct $3000 of capital losses against your income. Any capital loss above $3000 you have to carry over until next year.
So for example, with the last vesting, if the stock price is $70 that day(for example) when the espp share was purchased and your purchase price is $55 and you sell today at $58....you would have to pay ordinary income taxes of $15/share ($70-55)....And then you would report a capital loss of $12/share($70-58) but the total capital loss you can report is $3000...The rest you would have to carryover until next year...you aren't simply just paying $3/share capital gains. The loss you can use to offset your ordinary income gain is limited to $3000.