Do you have a lot of employer stock and in the market for a new home? If so, the thought of selling your stock to help with the down payment can be very tempting. There are many things to consider when evaluating the sale of employer stock to help with a new home purchase. Use the quick links below to jump to the relevant employer stock situations that apply to you.

Where Did Your Employer Stock Come From?

You might be wondering what the difference is, stock is stock right? Actually how your employer stock was purchased plays a meaningful role in weighing the decision to sell your stock to purchase a home. This is mainly due to how each of these employer stock scenarios are taxed.

Stock Options

The most common type of stock options are non-qualified stock options. Stock options are a valuable form of compensation. They are often awarded annually as a grant of a bunch of shares with vesting period. As shares of the grant vest, you then have the option to exercise the shares and purchase them at the strike price of your option. Your stock options typically have a ticking clock, which is the expiration date. 

Vested Options

If you have vested options that you want to exercise and then sell to purchase your home, you will need to factor in the cost of purchasing the shares and the taxes owed on this process.

Using a 24% Federal Tax Rate & 4.63 Colorado State Tax Rate for Example

Exercised Options

If you are considering the sale of employer stock that has already been exercised, then the tax impact may be less dramatic than the previous example. You will only need to pay taxes on the gain. If a loss occurred with shares, then you may actually be able to reduce your taxes.

Using 15% Long-Term Capital Gains in Example

Vested Restricted Stock Units (RSUs)

RSUs are different from non-qualified stock options in many ways. One of the biggest differences is that you do not have control over the tax situation. When RSUs vest, you automatically become the direct owner of those shares and have no control over the tax impact. The value of RSUs when they vest are considered earned income which means Federal Taxes, State Taxes, as well as, Social Security and Medicare taxes apply.

One benefit of not having control of the tax situation is there is no second-guessing, which occurs often with stock options. When my clients don’t have a preference to keep the shares, they act immediately at vesting and sell their shares. There is no additional tax impact if the value hasn’t changed.

After shares vest the growth or loss will be treated as a capital gain. 

Employee Stock Purchase Plan (ESPP) 

An employer stock purchase plan (ESPP) is a great way to increase your annual income. If you take advantage of this benefit, you need to be aware of the unique tax treatment.

ESPP actually have more complexity to them than some stock options and RSUs. Here is a quick rundown of the major differences:

  • You have to commit a percentage of your pay
  • Taxes can actually be deferred (only recognized when sold)
  • Special tax treatment for Qualified Disposition

Taxes If Sold at Purchase

This strategy is the way you can basically eliminate the risk of stock volatility. If you act quickly on the purchase date, you can sell your shares that are purchased. Doing so requires that you recognize the difference between the purchase price and what you paid after your discount as earned income. 

Here are a few examples I created for Intel employees ESPP:

Taxes If Sold as Qualified Disposition

If your strategy is to hold for the unique tax treatment of a qualified disposition, then you need to meet the following holding period to qualify:

  1. Hold shares for at least a year and one day from purchase
  2. Hold shares for at least two years and one day from the beginning of the offering period

Qualified disposition sales allow gains to be taxed at more favorable long-term capital gains rates.

Taxes if Sold as Non-Qualified Disposition

If you fail to meet the qualified disposition requirements, then you have a non-qualified disposition. The gains or losses are treated as ordinary income at ordinary income rates.

That is a 9% savings, which can be even greater if you find yourself in a higher tax bracket than the 24% used in this example.

Normal Stock Purchase

This is the most straight forward form of stock and may apply to other companies or investments that you own outside of retirement accounts. There is no special tax treatment. Gains and losses are treated as capital gains/losses.

See previous long-term capital gain examples, as that is the same treatment for your normally purchased stocks.

Your Home Purchase Goal

Purchasing a home is one of the biggest financial decisions you can make. As a result, it could be a stressful, but exciting experience. It is also a complicated decision because there are so many factors that play into the purchase of your home.

Why Are Your Purchasing a Home

It is really easy to get caught up in “should’s”. You should buy a home because ______. Don’t worry about what you should do and focus more on why you want to purchase a home. This will help you focus on the type of home you want to purchase. If you realize that there isn’t a great reason other than someone told you that you should or your friends are starting to purchase homes, then you may want to pump your breaks.


A common reason for purchasing a home is because it is an investment. It technically is an investment, because your home will likely increase in value, if even only at normal inflation rates. However, it will not generate income for you and the growth in value may never be realized or accessible until you pass away.

However, you can also purchase an investment property, which actively generates value in the form of rent payments and also has the potential to increase in value. 

You may be thinking to yourself “initially you will live in the home you purchase, but will turn it into an investment property once you purchase your next home.” That may be a good strategy, but I want to warn you of one thing that a few of my real estate friends have told me, “a home that you purchase to live in doesn’t always make the best investment property.” It’s because some of the features you pay a premium for when purchasing a home doesn’t necessarily increase the value to renters.

Hate Renting

If you are like my wife and I, you may just hate renting. Fair enough, but remember that emotions are usually a poor guide in making major financial decisions. You will hopefully have other reasons to be purchasing a home that will make the purchase more fulfilling.


A growing family can definitely increase the pressure to purchase a home. My wife and I had no clue how many kids we wanted to have, but if you have an idea for yourself, that may impact the size or feature of your home purchase. We literally just painted my daughters room and are at capacity unless we start bunking future children in the same room. 


If you know that you want to be located in a specific location for a long period of time, then it may make sense to lock down your living quarters. Home prices have stabilized a bit from previous years, when double digit growth was common. Still, you never know if rising values are going to pick back up. We feared being priced out of Fort Collins, CO due to the rapidly rising home prices. Purchasing our first home guaranteed that we’d always be able to afford living in Fort Collins.

What Can You Afford

Do you know how much home you can afford? Don’t base your decision solely off of what the mortgage company is going to allow you to borrow. In most cases, maximizing your mortgage loan puts the squeeze on the rest of your monthly budget, which means your goals or lifestyle may suffer.

Mortgage Payment

The mortgage payment is the most obvious part of understanding what you may be able to afford with your home purchase. A mortgage payment consists of principal and interest. Principal payments reduce your outstanding loan value. Interest payments payoff the interest that accrues each month. Early on, your principal payment is very small, but gradually increases every payment. Interests start out large and gradually decreases.

Some mortgage payments include escrow payments, which includes taxes & home insurance.


Property taxes vary substantially based on location, but may play a big factor in what you can afford. Property taxes also may increase as your property value increases, which is important to be aware of because that increases your monthly payment.


Insurance is another factor in your total home cost. It also may rise over time. This is due to increased home value, but in my home’s case can also go up due to the hail storms that we seem to get like clockwork annually. Cross your fingers we don’t need a full roof replacement.


This may not apply to everyone, but HOA fees can be quite large in some neighborhoods. Make sure this is a question that you know the answer to before you put in the offer on your new home.


This area can vary. Not only by the age of the home, but how handy you may be. I’m not very handy at all when it comes to any of the advanced maintenance needed, which means I have to hire a professional. Hiring professionals always cost more than winging it or having a DIYer approach. 

Be aware that sometimes, you may make matters worse or put off repairs too long, which may compound the damage to your bank account and frustration to your life.

Growing into Your Home

There is a good chance that your current furniture is not going to look right into a new home. You will want to make sure you factor in the cost of furnishing your new home, if that is going to be a pressing concern soon after you move in.

Avoid adding to credit balances outside of your normal activity during the mortgage underwriting process. I have heard horror stories of individuals and families losing out on their home purchase because they either bought a new car or opened up a new credit card to purchase their furniture.


Most likely your living space will be larger or maybe you are just upgrading from having roommates. There is a good chance that you will need to buy new things for the first few years. What items have you been borrowing or sharing? Do you have a yard now? That may mean you are buying some fun things like a grill and some not so fun things like a lawnmower and a rake.

How Does the Stock Proceeds Help

It helps to get clear on why you may be considering your employer stock to purchase your home. I agree that it makes sense to factor in all of your options when building a strategy, but selling off shares is removing an asset from your more liquid resources and applying to it a less liquid asset. 

Monthly Payment

If you are struggling to make the numbers work because of the monthly payment, then that may warrant a second look at what a home with a lower price point will get you…. Not feeling it? Then, selling your shares to get your monthly payment in a price point that works, may make sense.

Primary Mortgage Insurance (PMI)

Primary mortgage insurance is an additional cost that you have to pay when you don’t come to the table with a large enough down payment. Typically, you need to have a 20% down payment to avoid this cost. PMI typically falls off at an established time frame, though you may be able to speed up that process.

Related Strategy Guide: Do I Need a 20% Down Payment for a Home Purchase

If you get an FHA loan, then the mortgage insurance premium looks a little different. It also does not fall off like PMI would.

Preserve Emergency Savings

You may have the cash in your savings to put a down payment on your home, but that includes your emergency savings. I agree that you should keep your emergency savings in tact to the best of your ability. 

People think that a recession plays a big impact on a home that you have already purchased, but in reality, the only thing to worry about is your ability to pay your mortgage. If you have an emergency savings to ride out any loss of income turbulence then it doesn’t matter if your home value falls in price.

Peace of Mind

It may just feel better to have a lower monthly payment, or maybe you are lucky enough to pay for the whole home without requiring a mortgage. Peace of mind is great, but it also is an emotion and emotions tend to lead us to poor financial strategies.

Think big picture and make sure that your overall plan is not negatively impacted by making yourself house poor.

Employer Stock Risk

Do you know how risky your employer stock is? At the end of the day, your employer stock is an extremely risky asset. The reason is because of the potential for a “double whammy”. I consider it a double whammy when your employer experiences less than optimal performance which plummets your employer stock value, then they announce layoffs and you are on the chopping block.

Diversifying Risk 

Regardless of what you decide on how you want to allocate your employer stock to you home purchase, you should at the very least consider diversifying your investments. It’s not a binary choice: “hold employer stock or sell to purchase your home”. You can instead, sell employer stock and diversify your investment in some other manner. 

Here are a few alternative strategies that my clients have used in the past:

  • Sell stock to diversify investment (reduce risk)
  • Gift appreciated stock to charity rather than cash (reduce taxes if itemizing deductions)
  • Sell stock and max out retirement accounts (reduce risk, and taxes potentially)
  • Gift appreciated stock to lower income family members rather than cash (shifts tax to lower tax bracket or no taxes on gains potentially)

Will You Use Your Employer Stock to Purchase Your Home?

Should you use your employer stock to purchase a home is a great question to ask because even if you end up not using your employer stock, it allows you to run inventory on your whole financial plan, not just your employer stock or potential new home purchase.

Here is a summary of the factors to consider as you formulate your plan around purchasing your home: 

  1. Be aware of the potential tax impacts of selling your employer stock. 
  2. Get clear on what you want in a home 
  3. Understand what you can afford 
  4. Evaluate your exposure to your employer and consider diversifying your risk beyond just applying it towards a home purchase.

Level Up Bonus Tip

If you do plan to use your employer stock to purchase your home, be aware that you can pinpoint the specific lot of shares you wish to sell to better control the tax impact from the various buckets of employer stock that you may have.

If you would like to collaborate on a more complete plan, you can schedule a complimentary call today.