- November 12, 2023
- Posted by: legaleseblogger
- Category: Related News
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**Considerations for Donating ESPP Stock and Tax Implications**
I am typically used to donating a portion of my RSU stock annually to my Donor Advised Fund (DAF). However, this year I am thinking about donating some of my ESPP stock instead. When I inquired with my finance department about the possibility of approving the transfer, they provided me with the following response:
“Due to company tax reporting requirements, we are unable to simply authorize the transfer of ESPP shares. If you still wish to donate your sellable ESPP shares, it would be necessary for us to treat the donation as a disposition. Consequently, this would result in it being considered a taxable event and reported on your W-2 for this year. From our perspective, tax reporting would be managed in the same manner whether you donate the ESPP shares or the income from the sale of the ESPP shares. Both scenarios would be reported as a disposition for tax purposes. Therefore, the decision to donate the ESPP shares directly or sell them and donate the proceeds is at your discretion.”
In light of this information, I am left with a few questions. If I opt to donate the shares directly and it is recorded on my W-2 as a disposition, will I still be able to avoid the capital gains tax that I would typically bypass by donating stock? Or should I sell the shares and donate the proceeds since there doesn’t appear to be any distinction in terms of tax implications?
Given the complexities and potential tax ramifications involved in these decisions, I am considering utilizing the AI Legalese Decoder, which can help me understand and navigate the intricacies of tax reporting requirements and the legal implications associated with donating ESPP stock. This tool can provide me with a clear and simplified explanation of the options available to me, enabling me to make informed and strategic decisions regarding the donation of my ESPP stock.
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I’ve heard a variety of things but the issue is likely that the ESPP discount is “income” that taxes must be paid on. It’s tricky though as depending on when you sell different taxes apply and I’ve even heard that you’re supposed to pay tax on the discount amount in the year the stock was purchased. Regardless, it’s probably difficult to track what all the taxes should be so the charities won’t accept stock purchased through an ESPP because they don’t want to mess with it.
Which means that you likely won’t avoid the taxes so either method works.