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Net Unrealized Appreciation (NUA) Calculator

Compare NUA strategy vs standard 401(k) rollover for employer stock.

Stock Details
Total value of employer stock in 401(k)
Original purchase price (what you paid)
Tax Rates
Combined state/local tax rate
Options

Tax Comparison

Enter your stock details to compare NUA vs rollover strategies.

NUA Strategy Tips
  1. Lump-sum distribution - Must take entire 401(k) balance in one tax year
  2. Triggering event - Separation from service, age 59½, disability, or death
  3. Employer securities only - Only applies to employer stock, not mutual funds
  4. In-kind transfer - Stock must go to taxable brokerage account, not IRA
  5. Same tax year requirement - Entire distribution must occur in single calendar year
  6. Consultation recommended - Work with tax professional to execute NUA correctly
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Important Disclaimer
NUA is a complex tax strategy with strict IRS requirements. This calculator provides estimates for educational purposes only. Actual tax liability depends on your complete financial situation, state taxes, AMT, and NIIT implications. Always consult with a qualified tax professional or financial advisor before implementing NUA. Tax rules change annually and individual circumstances vary significantly.

What is Net Unrealized Appreciation (NUA)?

Net Unrealized Appreciation (NUA) is a tax strategy that allows employees with company stock in their 401(k) to pay significantly lower taxes on the appreciation of that stock. Instead of paying ordinary income tax rates (up to 37%) on the entire distribution, you pay ordinary income tax only on the cost basis, while the appreciation (the NUA) is taxed at the lower long-term capital gains rate (0%, 15%, or 20%).

For example, if you have $500,000 of employer stock with a cost basis of $100,000, the NUA would be $400,000. With a standard IRA rollover, that entire $500,000 would eventually be taxed as ordinary income. With the NUA strategy, only the $100,000 basis is taxed as ordinary income immediately, while the $400,000 appreciation is taxed at capital gains rates—potentially saving over $88,000 in taxes.

The NUA strategy is particularly valuable for employees of companies with significant stock appreciation, those in higher tax brackets, and those who may need access to funds before age 59½ (since the stock can be sold immediately without penalty on the NUA portion).

How the NUA Strategy Works

Understanding the mechanics of NUA is essential for determining if it's right for your situation.

NUA Strategy
  1. Stock transferred "in-kind" to taxable brokerage account
  2. Cost basis taxed as ordinary income (in year of distribution)
  3. NUA (appreciation) taxed at long-term capital gains rate when sold
  4. Any additional appreciation after distribution taxed based on holding period
  5. Immediate access to funds (after paying tax on basis)
Standard IRA Rollover
  1. Stock sold and rolled to Traditional IRA
  2. No immediate tax liability
  3. Entire distribution taxed as ordinary income when withdrawn
  4. Required Minimum Distributions (RMDs) starting at age 73
  5. 10% penalty if withdrawn before 59½

When Does NUA Make Sense?

NUA is not for everyone. Consider the following factors:

Factor NUA Favorable Rollover Favorable
Stock Appreciation High appreciation (NUA > 50% of value) Low appreciation (cost basis is high)
Tax Bracket High ordinary income bracket (32-37%) Low ordinary income bracket (10-12%)
Need for Funds Need access before 59½ Can wait until retirement
Diversification Want to diversify immediately Comfortable holding concentrated position
Estate Planning Want step-up in basis for heirs Prefer tax-deferred growth

NUA Example: $500,000 in Employer Stock

Current Stock Value

$500,000

Cost Basis

$100,000

NUA (Appreciation)

$400,000

With NUA Strategy:
  • Tax on basis ($100K × 24%): $24,000
  • Tax on NUA ($400K × 15%): $60,000
  • Total Tax: $84,000
  • Net After Tax: $416,000
With IRA Rollover (at withdrawal):
  • Tax on entire $500K × 24%: $120,000
  • Total Tax: $120,000
  • Net After Tax: $380,000
NUA Tax Savings: $36,000 (30% less tax!)

Frequently Asked Questions

Yes! You can apply NUA to some shares and roll the rest to an IRA. However, the entire 401(k) balance must be distributed in a single tax year (lump-sum distribution requirement). You might keep shares with the highest appreciation for NUA and roll lower-basis shares to the IRA.

The NUA portion always qualifies for long-term capital gains rates, regardless of how soon you sell after distribution. However, any appreciation that occurs AFTER the distribution is subject to normal holding period rules—short-term if held less than a year, long-term if held more than a year.

The 10% penalty applies only to the cost basis if you're under 59½, not to the NUA portion. For example, if your basis is $100,000, you'd pay a $10,000 penalty (plus ordinary income tax on the basis). However, if you separate from service in the year you turn 55 or later, the penalty may not apply at all.

Your heirs inherit the NUA shares and any appreciation AFTER distribution gets a step-up in basis. However, the NUA itself does NOT get a step-up—your heirs will owe capital gains tax on the original NUA when they sell. This is different from regular inherited stock which gets a full step-up.

NUA applies to employer stock purchased with pre-tax 401(k) or employer match contributions. Roth contributions grow tax-free and don't need NUA treatment. If you have both, you may be able to apply NUA only to the pre-tax portion while rolling Roth amounts to a Roth IRA.

Your 401(k) plan administrator can provide the cost basis. This is the value of shares when they were contributed or purchased in the plan. Request Form 1099-R after distribution—it should show the taxable amount (cost basis) and NUA in Box 6. If multiple lots were purchased at different times, you may have different basis for different shares.
Important Disclaimer

This calculator provides estimates for educational purposes only. NUA rules are complex and involve multiple IRS requirements. Your actual tax situation depends on many factors including state taxes, alternative minimum tax (AMT), Net Investment Income Tax (NIIT), and your overall financial picture. Always consult with a qualified tax professional or financial advisor before implementing an NUA strategy.