What is the tax rate for selling stocks?
Assuming that taxes were withheld when you received the options, you would now only owe tax on the profit from the sale of the stock.  The cost basis would be whatever you bought the stock for (the strike price of the options in this case), and the profit will be the total amount received from the sale minus the total cost of those shares. Since you bought the stock more than one year ago, you will get taxed at the long-term capital gains rate of 15% (unless you are in the 39.6% tax bracket, in which case the rate is 20%). As with all tax advice on this site, you need to check with a tax specialist when you actually file, but that should give you a rough indication of what your tax liability is.
I think people in general tend to unnecessarily over-complicate this issue.  Here's what I think you should do in any situation like this: First and foremost, put all tax considerations aside and decide whether it makes sense to sell the stock now or hold on to it for the long term based on its merits as an investment.  Tax considerations have absolutely nothing to do with whether the stock is a good investment.  If you consider all non-tax factors and decide to hold on to it for the long term, then you can use the tax considerations as a very minor input to how long you should hold it - in other words, don't set your time horizon to 17.5 months if waiting another 2 weeks gives you better tax treatment. You're going to pay taxes on your gains no matter what.  The only difference is whether you pay capital gains tax or income tax.  Granted, the income tax rate is higher, but wouldn't it suck if you pay a LOT less tax only because you have a LOT less value in your stock? So to answer your question - I would say, absolutely not, tax consequences do not make it worthwhile to hold on to your ESPP shares.  If you decide to hold on to your ESPP for other reasons (and they better be good ones to put that much free profit at risk), only then should you look at the tax consequences to help fine-tune your strategy. "which means the current total is $548,100. Is that correct? Yep Unfortunately the ""current"" GM stock is different than the GM stock of 1989.  GM went bankrupt in 2011.  It's original stock changed to Motors Liquidation Company (MTLQQ) and is essentially worthless today.  There was no conversion from the old stock to the new stock. What do I do with these certificates? Can I bring them to my bank, or do I need to open an account with a stock company like Fidelity? See here for some instructions on cashing them in (or at least registering them electronically).  I've never dealt with physical stocks, but I presume that a broker is going to charge you something for registering them vs. direct registration, though I have no idea how much that would be. I read somewhere that I only have to pay taxes when I cash out these stocks. But are these rules any different because I inherited the stocks? You will pay capital gains tax on the increase in value from the time your father died to the time you sell the shares.  If that time is more than one year (and the stock has gone up in value) you will pay a 15% tax on the total increase.  If you have held them less than one year, they will be short-term capital gains which will count as regular income, and you will pay whatever your marginal tax rate is. If you sell the stock at a loss, then you'll be able to deduct some or all of that loss from your income, and may be able to carry forward losses for a few years as well. I did not catch that the stock you mention was GM stock.  GM went bankrupt in 2011, so it's likely that the stock you own is worthless.  I have edited the first answer appropriately but left the other two since they apply more generally.  In your case the best you get is a tax deduction for the loss in value from the date your father died." "The scenario you mention regarding capital gains is pretty much the core of the issue. Here's a run-down from PolitiFact.com that explains it a bit. It's important to focus on it being the tax rate, not the tax amount (which I think you get, but I want to reinforce that for other readers).  Basically, most of Buffett's income comes from capital gains and   dividends, income from investments he makes with the money he already   has. Income earned by buying and selling stocks or from stock   dividends is generally taxed at 15 percent, the rate for long-term   capital gains and qualified dividends. Buffett also mentioned that some of the ""mega-rich"" are hedge fund   managers ""who earn billions from our daily labors but are allowed to   classify our income as 'carried interest,' thereby getting a bargain   15 percent tax rate."" We don't know the taxes paid by Buffett's secretary, who was mentioned   by Obama but not by Buffett. Buffet's secretary would have to make a   high salary, or else typical deductions (such as the child tax credit)   would offset taxes owed. Let's say the secretary is a particularly   well-compensated executive assistant, making adjusted income more than   $83,600 in income. (Yes, that sounds like a lot to us, too, but   remember: We're talking about the secretary to one of the richest   people in the world.) In that case, marginal tax rates of 28 percent   would apply. Then, there would be payroll taxes of 6.25 percent on the   first $106,800, money that goes to Social Security, and another 1.45   percent on all income, which goes to Medicare. The secretary’s overall   tax rate would be lower than 28 percent, since not all the income   would be taxed at that rate, only the income above $83,600. Buffett, meanwhile, would pay very little, if anything, in payroll   taxes. In the New York Times op-ed, Buffett said he paid 17.4 percent   in taxes. Thinking of the secretary, it gets a little complicated,   given how the tax brackets work, but basically, people who make   between $100,000 and $200,000 are paying around 20 percent in federal   taxes, including payroll and income taxes, according to an analysis   from the nonpartisan Tax Policy Center. So in this case, the secretary's rate is higher because so much of   Buffett's income comes from investments and is taxed at the lower   capital gains rate. Here's Buffet's original Op-Ed in the NYT for those of you that aren't familiar." "Why only long term investments? What do they care if I buy and sell   shares in a company in the same year? Simple, your actually investing when you hold it for a long term. If you hold a stock for a week or a month there is very little that can happen to change the price, in a perfect market the value of a company should stay the same from yesterday to today so long as there is no news(a perfect market cannot exist). When you hold a stock for a long term you really are investing in the company and saying ""this company will grow"". Short term investing is mostly speculation and speculation causes securities to be incorrectly valued. So when a retail investor puts money into something like Facebook for example they can easily be burned by speculation whether its to the upside or downside. If the goal is to get me to invest my money, then why not give apply   capital gains tax to my savings account at my local bank? Or a CD   account? I believe your gains on these accounts are taxed... Not sure at what rate. If the goal is to help the overall health of business, how does it do   that? During an IPO, the business certainly raises money, but after   that I'm just buying and selling shares with other private   shareholders. Why does the government give me an incentive to do this   (and then hold onto it for at least a year)? There are many reasons why a company cares about its market price: A companies market cap is calculated by price * shares outstanding. A market cap is basically what the market is saying your company is worth. A company can offer more shares or sell shares they currently hold in order to raise even more capital. A company can offer shares instead of cash when buying out another company. It can pay for many things with shares. Many executives and top level employees are payed with stock options, so they defiantly want to see there price higher. these are some basic reasons but there are more and they can be more complex." E.g. I buy 1 stock unit for $100.00 and sell it later for $150.00 => income taxes arise. Correct. You pay tax on your gains, i.e.: the different between net proceeds and gross costs (proceeds sans fees, acquisition costs including fees). I buy 1 stock unit for $150.00 and sell it later for $100.00 => no income taxes here. Not correct. The loss is deductible from other capital gains, and if no other capital gains - from your income (up to $3000 a year, until exhausted). Also, there are two different tax rate sets for capital gains: short term (holding up to 1 year) and long term (more than that). Short term capital gains tax matches ordinary income brackets, whereas long term capital gains tax brackets are much lower. If significant amounts are involved, that would be a good time to consult a tax professional (EA/CPA licensed in your state).  Generally, sale of a business is an ordinary income and you can only deduct tangible expenses, as Joe said. That would be laptops, bills, expenses per receipt, of course they must all be directly attributable to the business. You will need to be able to show that the laptops has only been used in business, recapture depreciation, etc. Same with all the rest of the expenses. If you're incorporated (i.e.: you hold this software under an S-Corp), then you're selling stocks, not business, and the tax treatment may be different, but I'm guessing this is not the case for you. You should get a 1099-MISC for the $5000 you got.  And your broker should send you a 1099-B for the $5500 sale of Google stock. These are two totally separate things as far as the US IRS is concerned. 1) You made $5000 in wages. You will pay income tax on this as well as FICA and other state and local taxes. 2) You will report that you paid $5000 for stock, and sold it for $5500 without holding it for one year. Since this was short term, you will pay tax on the $500 in income you made. These numbers will go on different parts of your tax form.  Essentially in your case, you'll have to pay regular income tax rates on the whole $5500, but that's only because short term capital gains are treated as income.  There's always the possibility that could change (unlikely).  It also helps to think of them separately because if you held the stock for a year, you would pay different tax on that $500.  Regardless, you report them in different ways on your taxes. "I'm 25, make ~40k/yr, have about 18k in investments right now.  all money I've earned mind you.  I sold some stock last year for a capital gain of 1800.  that's a cap gains tax of $270, if the cap gains tax didn't exist I would have paid 450.  that's an extra $180 in taxes that hits me right in my middle class, trying to build a nest egg, guts.  would you please stop with all the bullshit about the capital gains taxes being there for the ""moneyed elite""  you can see how just a small sale could have incurred extra taxes for me, could you imagine someone who may be older and has larger gains to report?"