The Employee Benefit Most People Ignore: Your ESPP | Robby Lewis

By: Robby Lewis 

If your company offers an Employee Stock Purchase Plan and you're not using it, you might be leaving free money on the table. In my work with tech employees, the ESPP is one of the most overlooked benefits I see. People max out their 401(k), watch their RSUs closely, and let the ESPP enrollment email sit unopened. Once you understand how it works, it's often one of the easiest wins in your entire comp package.

How the Discount Works

An ESPP lets you buy company stock at a discount, typically 15%, through payroll deductions. At the end of each purchase period (usually six months), the money you've set aside buys shares at the discounted price.

Many plans also include a lookback, which makes the deal even better. Your purchase price is based on the lower of the stock price at the start or end of the period, with the discount applied on top. If the stock was $100 at the start and $130 at the end, you pay $85 for shares worth $130. That's an immediate gain of over 50%.

Even without a lookback, and even if the stock goes nowhere, a 15% discount is a built in return you don't get anywhere else.

How It's Taxed

The discount is treated as ordinary income, similar to a bonus, and there's no way around that part. The question is just when and how the pieces get categorized.

Sell right away and the spread between your purchase price and the market value at purchase is ordinary income. Any movement after the purchase date is a capital gain or loss, which is usually near zero if you sell immediately.

Hold long enough (a year from purchase, two from the start of the offering) and some of the gain shifts to long term capital gains rates, which can mean real tax savings. The tradeoff is that you have to hold a concentrated position in your employer's stock for one to two years to get there. Whether that risk is worth the tax benefit depends on your situation and how much of your financial life is already tied to your company.

The Case for Selling Immediately

One strategy worth understanding is the simplest one: enroll, contribute what the plan allows, and sell the shares as soon as they land.

Selling immediately locks in the discount as a nearly guaranteed gain. You're not betting on the stock. You're capturing a 15% or better return, paying ordinary income tax on it, and moving on. Think of it as bonusing yourself. And with a lookback in a rising market, the gain can be far larger than the discount alone.

This approach also addresses a problem many tech employees already have: too much exposure to one company. Your paycheck and RSUs are already tied to your employer. Selling ESPP shares right away lets you take the win and put the cash to work in your broader plan.

One Practical Note

Contributions come out of your paycheck after tax, so your take home pay dips during the period. The money comes back, plus the discount, when the shares are purchased and sold.

The Bottom Line

If your employer offers an ESPP with a real discount, participating is often one of the easiest wins available to you, and the sell immediately approach is worth a serious look. It's not exciting, and that's the point.

If you want help fitting an ESPP into your plan or handling the tax reporting, reach out. This is exactly what we help clients with every day.

Gerber Kawasaki Wealth & Investment Management is an investment advisor located in California. Gerber Kawasaki Wealth & Investment Management is registered with the Securities and Exchange Commission (SEC). Registration of an investment advisor does not imply any specific level of skill or training and does not constitute an endorsement of the firm by the Commission. Gerber Kawasaki only transacts business in states in which it is properly registered or is excluded or exempted from registration. A copy of Gerber Kawasaki Wealth & Investment Management 's current written disclosure brochure filed with the SEC which discusses, among other things, Gerber Kawasaki Wealth & Investment Management's business practices, services and fees, is available through the SEC's website at: http://www.adviserinfo.sec.gov .

Robby Lewis is a Financial Advisor of Santa Monica, California-based Gerber Kawasaki Inc., an SEC-registered investment firm with approximately ~$4.78B billion in assets under management and assets under advisement as of 06/30/26. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. This material is for general information only and is not intended to provide specific tax or investment advice. Consult your tax professional regarding your individual situation.To determine which course of action may be appropriate for you, consult your financial advisor. No strategy assures success or protects against loss. Readers shouldn't buy any investment without doing their research to determine if the investments are suitable for their situation. “All investments involve risk and one should consult a financial advisor before making any investments. Past performance is not indicative of future results."