Broker Check

Links: EMPLOYEE STOCK PURCHASE PLAN (ESPP)


An employee stock purchase plan, (ESPP) is a type of broad-based stock plan that allows employees to use after-tax payroll deductions to acquire their company's stock, usually at a discount of up to 15%.

Are ESPPs good investments? These plans can be great investments if used correctly. Purchasing stock at a discount is certainly a valuable tool for accumulating wealth, but comes with investment risks you should consider. An ESPP plan with a 15% discount effectively yields an immediate 17.6% return on investment.

An employee stock purchase plan allows you to buy company stock at a bargain price. Discounts usually range from 5% to 15%. For example, if you work and participate in Hilton's ESPP, you can buy Hilton stock at a 15% discount. If Hilton's stock is trading at $130/share, they'll buy it at $110.50/share for you.

What is the difference between ESOP and ESPP?

An ESOP is a qualified defined contribution retirement plan, so employees don't purchase shares with their own money. An ESPP, on the other hand, is a plan that allows employees to use their own money to buy company shares at a discount.

 Is ESPP pre or post tax?

Unlike pre-tax contributions to a 401(k), contributions to an ESPP are made with after-tax dollars. This means a “true” reduction of $22,500 per year of cash flow from your paycheck.

Link: Article-4 Factors to Consider Before Participating in your ESPP

Link: Article-Employee Stock Purchase Plan(ESPP)

Link: Article-Blog: How do Employee Stock Purchase Plans Work?

Link: Article-When to Sell ESPP Shares for Tax Benefits?

Link: YouTube Taxes on ESPPs? Employee stock purchase plans (ESPPs) taxes

Link: YouTube Employee Stock Purchase Plans (ESS)s) Corp Concepts & Benefits

Link: YouTube Restricted Stock & RSUs: Taxes & Key Decision after tax return