If I get cash compensation for my stocks (following a merger for example) does that qualify for capital gains tax?
In the US this is considered a sale, and the proceeds will be taxed as if you've sold the stocks in any other way. The decision about the treatment (capital, ordinary, etc) is dependent on what kind of stock that is, how you acquired it, how long have you held it, etc. If it is a regular stock that you bought as an investment and held it for more than a year - then it will likely to be a capital gain treatment. However, this is only relevant for the US taxation. Since you're a UK person, you should also check how it is handled in the UK, which may or may not be different.
"I had been pondering this recently myself too.  This question motivated me to do a little research.  It appears that what happens is that (take a deep breath) the capital gain does push you into the next tax bracket, but the capital gain is always interpreted as the ""last"" income you received, so that if your non-capital-gains income is less than the threshold, it will all be taxed in the lower bracket, and only your capital gain will be taxed in the higher bracket (but it will be taxed at the capital-gains rate of that higher bracket). In short, a capital gain can only push capital gains into higher capital-gains tax brackets; it cannot push ordinary income into higher ordinary-income tax brackets.  In addition, the amount of the capital gain is taxed in a marginal fashion, such that any portion of the gain that will ""fit"" into a lower bracket will be taxed at a lower level, with only the topmost portion of any gain being taxed at the top rate. This site is one claiming this: Will capital gain or dividend income push my other income into a higher tax bracket? No, the tax rates apply first to your “ordinary income” (income from sources other than long-term capital gains or qualifying dividends) so these items that are taxed at special rates won’t push your other income into a higher tax bracket. If my ordinary income puts me in the 15% tax bracket, can I receive an unlimited amount of long-term capital gain at the 0% rate? No, the 0% rate applies only to the amount of long-term capital gain and dividend income needed to “fill up” the 15% tax bracket. For example, if your ordinary income is $4,000 below the figure that would put you in the 25% bracket and you have a $10,000 long-term capital gain, you’ll pay 0% on $4,000 of your capital gain and 15% on the rest. There are several Bogleheads forum threads (here, here, here and here) that also touch on the same issue. The last of those links to the IRS capital gains worksheet.  I traced through the logic and I believe it confirms this.  Here's how it works: (In conclusion, we now know Mitt Romney's secret.)" "In financial theory, there is no reason for a difference in investor return to exist between dividend paying and non-dividend paying stocks, except for tax consequences.  This is because in theory, a company can either pay dividends to investors [who can reinvest the funds themselves], or reinvest its capital and earn the same return on that reinvestment [and the shareholder still has the choice to sell a fraction of their holdings, if they prefer to have cash]. That theory may not match reality, because often companies pay or don't pay dividends based on their stage of life.  For example, early-stage mining companies often have no free cashflow to pay dividends [they are capital intensive until the mines are operational]. On the other side, longstanding companies may have no projects left that would be a  good fit for further investment, and so they pay out dividends instead, effectively allowing the shareholder to decide where to reinvest the money. Therefore, saying ""dividend paying""/""growth stock"" can be a proxy for talking about the stage of life + risk and return of a company. Saying dividend paying implies ""long-standing blue chip company with relatively low capital requirements and a stable business"". Likewise ""growth stocks"" [/ non-dividend paying] implies ""new startup company that still needs capital and thus is somewhat unproven, with a chance for good return to match the higher risk"". So in theory, dividend payment policy makes no difference. In practice, it makes a difference for two reasons: (1) You will most likely be taxed differently on selling stock vs receiving dividends [Which one is better for you is a specific question relying on your jurisdiction, your current income, and things like what type of stock / how long you hold it]. For example in Canada, if you earn ~ < $40k, your dividends are very likely to have a preferential tax treatment to selling shares for capital gains [but your province and specific other numbers would influence this]. In the United States, I believe capital gains are usually preferential as long as you hold the shares for a long time [but I am not 100% on this without looking it up]. (2) Dividend policy implies differences in the stage of life / risk level of a stock. This implication is not guaranteed, so be sure you are using other considerations to determine whether this is the case.  Therefore which dividend policy suits you better depends on your tax position and your risk tolerance." I wrote about this in another answer: You can sell the scrip dividend in the market; the capital gain from this sale may fall below the annual tax-free allowance for capital gains, in which case you don't pay any capital gains tax on that amount. For a cash dividend, however, there isn't a minimum taxable amount, so you would owe dividend tax on the entire dividend (and may therefore pay more taxes on a cash dividend). Since you haven't sold the shares in the market yet, you haven't earned any income on the shares. You don't owe taxes on the scrip until you sell the shares and earn capital gains on them. HMRC is very explicit about this, in CG33800: It is quite common for a company, particularly a quoted company, to offer its shareholders the option of receiving additional shares instead of a cash dividend. The expression `stock or scrip dividend' is used to describe shares issued in such circumstances. The basic position under tax law is that when a company makes a bonus issue of shares no distribution arises, and the bonus issue of shares is not income for tax purposes in the hands of the recipient. Obviously, if this is an issue for you, talk to a tax professional to make sure you get it right. The most tax efficient way to get some cash would be to sell some stocks from the Fidelity account that have the lowest capital gains. The tax will typically be 15% of the capital gains. This will be a one-time cost which should save you money compared to paying 7.5% on the loan year after year. Tax on selling the stock options will probably be higher, since you imply there would be high capital gains, and some of the proceeds might even be taxed as income, not capital gains. I'm assuming your talking USA. There are two ways to look. If you know you should pay on the cap gains, the best way to handle that separately from your salary is to file a quarterly tax payment.  That, I understand, is what the self-employed have to do. I'm in the situation where at some point, probably this year, the company that employs me will be bought out, and I will owe capital gains taxes on my shares gobbled up in the buy-out.  It's a cash-for-stock transaction.  So, in my case, I've just adjusted my W-4 to take advantage of the safe-harbor provision related to taxes I payed in 2016 and my salary.  The details vary depending on your situation, but in my case, I've calculated what it will take in W-4 allowances to make sure I pay 110% of my 2016 tax payment (after refund).  I'm not worrying about what the actual taxes on those shares of company stock will be, because I've met the rules for safe-harbor. Safe harbor just means that they can't penalize you for under-withholding or underpayment.  It doesn't mean I won't have to write a check on april 15. I did this for the last tax year so hopefully I can help you. You should get a 1099-B (around the same time you're getting your W-2(s)) from the trustee (whichever company facilitates the ESPP) that has all the information you need to file. You'll fill out a Schedule D and (probably) a Form 8949 to describe the capital gains and/or losses from your sale(s). It's no different than if you had bought and sold stock with any brokerage. It basically only affects the company's dealings with its own stock, not with operational concerns.  If the company were to offer more stock for sale, it would get less cash.  If it had a stock buy-back program, it could buy more shares for the same money.  If it was to offer to acquire another company in exchange for its own stock, the terms would be less attractive to the other company's owners.  Employee stock remuneration, stock options, and so forth would be affected, so there might be considerations and tax consequences for the company. To try to answer the three explicit questions: Every share of stock is treated proportionately: each share is assigned the same dollar amount of investment (1/176th part of the contribution in the example), and has the same discount amount (15% of $20 or $25, depending on when you sell, usually). So if you immediately sell 120 shares at $25, you have taxable income on the gain for those shares (120*($25-$17)). Either selling immediately or holding for the long term period (12-18 mo) can be advantageous, just in different ways.   Selling immediately avoids a risk of a decline in the price of the stock, and allows you to invest elsewhere and earn income on the proceeds for the next 12-18 months that you would not otherwise have had.  The downside is that all of your gain ($25-$17 per share) is taxed as ordinary income.   Holding for the full period is advantageous in that only the discount (15% of $20 or $25) will be taxed as ordinary income and the rest of the gain (sell price minus $20 or $25) will be taxed at long-term capital gain tax rates, which generally are lower than ordinary rates (all taxes are due in the year you do sell).  The catch is you will sell at different price, higher or lower, and thus have a risk of loss (or gain). You will never be (Federally) double taxed in any scenario.  The $3000 you put in will not be taxed after all is sold, as it is a return of your capital investment.  All money you receive in excess of the $3000 will be taxed, in all scenarios, just potentially at different rates, ordinary or capital gain.  (All this ignores AMT considerations, which you likely are not subject to.)