Updated July 28, 2026. Quick answer: $25,000 per calendar year, measured at the fair market value on the offering date — not by what you contribute and not at the purchase price. With a lookback in a rising stock, that ceiling buys fewer shares than people expect.
Measured at grant, not at purchase
IRC §423(b)(8) caps accrual at $25,000 of stock value per calendar year, valued when the option is granted — the offering date. Because a lookback lets you buy at a discount off the lower price, the number of shares the $25,000 buys is computed off the offering-date price, not the price you actually pay.
Why people are surprised
| Assumption | Reality |
|---|---|
| $25,000 of payroll contributions | $25,000 of grant-date stock value |
| Measured at purchase price | Measured at offering-date FMV |
| Per offering period | Per calendar year, across all offerings |
Overlapping offering periods
Plans with overlapping periods can have two offerings accruing against the same calendar year, which is where the aggregate cap starts binding in ways a single-period calculation misses. Your plan administrator applies this automatically; it is worth understanding why your purchase came back smaller than you budgeted for.
Sources
IRC §423(b)(8); Treas. Reg. §1.423-2(i).
This states what the cited authority says. It is not tax advice.