Retirement & investing · free calculator
NUA (Net Unrealized Appreciation) calculator
Compare the tax savings of NUA treatment on company stock in a 401(k) vs rolling everything into an IRA and selling normally.
NUA tax saved vs IRA rollover
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- NUA total tax (now + at sale)$119,058
- IRA rollover total tax (at sale)$187,352
NUA — the obscure 401(k) hack for company stock
If you have employer stock in your 401(k) with significant unrealized gains, Net Unrealized Appreciation (NUA) treatment under IRC 402(e)(4) can save serious tax. Most 401(k) participants and even many advisors miss it.
The mechanics
When you take a lump-sum distribution from a 401(k):
- Cost basis of company stock → taxed as ordinary income immediately
- Appreciation (NUA) → taxed as long-term capital gains WHEN sold (no ordinary)
- Future appreciation after distribution → also taxed at LTCG (1-year holding required)
Compare to the IRA rollover path: 100% of company stock balance becomes pre-tax IRA dollars, taxed at ordinary income on withdrawal.
When NUA wins big
- Long-term employee with low cost basis (e.g. 20% of current value)
- Currently in high tax bracket (32-37% ordinary)
- LTCG rate much lower than ordinary
- Plan to sell over time (LTCG taxed only on sale, deferral helps)
The strict requirements
- Must be a lump-sum distribution (entire 401(k) balance) within one calendar year
- Triggered by a qualifying event: separation from service, age 59½, death, disability
- Cannot have rolled any portion of the 401(k) to IRA in same year
- Must elect NUA at distribution — can't fix it later
One mistake — partial distribution, rollover during same year — disqualifies the entire NUA election.
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