NUA Calculator United States

What the NUA calculator does

The calculator estimates the tax under the Net Unrealized Appreciation (NUA) strategy for employer stock held in a workplace retirement plan. If you have built up company shares in a 401(k) or an employee stock ownership plan, how you take them out can change your lifetime tax bill considerably. The tool shows the after-tax value under NUA so you can compare it with a plain rollover.

NUA is the gain on employer stock that built up inside the plan: the fair market value at distribution minus the plan's cost basis. Under the strategy, that gain can be taxed at long-term capital gains rates instead of the ordinary income rates that normally apply to plan withdrawals.

How the NUA strategy is taxed

• The plan cost basis, what the plan paid for the shares, is taxed as ordinary income in the year you take the in-kind distribution.
• The NUA is not taxed at distribution. It is taxed as long-term capital gain when you sell, however briefly you hold the shares afterward.
• Any appreciation after the shares leave the plan is a normal capital gain, long-term if you hold more than a year and short-term if you sell sooner.

The calculator applies your ordinary rate to the cost basis, your long-term rate to the NUA and the right rate to any later appreciation, adds the taxes and subtracts them from the sale proceeds for your after-tax value.

Why the strategy can save tax

Ordinary plan withdrawals are taxed entirely as ordinary income, which for many retirees is well above the long-term capital gains rate. If most of your employer stock's value is appreciation, moving it to capital gains treatment can save a lot.

NUA works best when the cost basis is low compared with the current value: you pay ordinary tax on a small basis now in exchange for capital gains treatment on a large gain. When the basis is high relative to the gain, the immediate ordinary tax can outweigh the benefit, and a rollover to an IRA may be simpler and cheaper. Running your own numbers is the way to tell.

The trade-off against a rollover

The main alternative is rolling the whole plan balance, employer stock included, into a traditional IRA. That defers all tax until you withdraw, but every dollar withdrawn is then ordinary income, and the shares become subject to required minimum distributions.

NUA means paying ordinary tax on the basis now and meeting strict lump-sum distribution rules. In return, the appreciation gets long-term capital gains treatment and those shares leave the plan. The better choice depends on the size of the basis, your current and expected tax rates, when you need the money and your estate plans. Compare the after-tax figure here with your rollover projection.

What you need to enter

• The number of employer shares being distributed.
• The plan cost basis per share, available from your plan administrator.
• The fair market value per share on the distribution date.
• Your expected or actual sale price per share.
• Your marginal ordinary income tax rate and your long-term capital gains rate.

You enter the rates directly because they depend on your total income, filing status and state. The ordinary tax on the basis falls in a single year, and a large distribution can push part of your income into a higher bracket, so choose a marginal rate that reflects that.

Reading your result

The output shows the cost basis taxed now and its ordinary tax, the NUA and its long-term tax, any post-distribution gain and its tax, and your after-tax value, so you can see how much of the benefit comes from moving the appreciation to capital gains treatment.

This is a simplified per-lot estimate. It does not model the net investment income tax, state income tax, required minimum distributions, the early distribution penalty that can apply to the basis before age 59½ or the interaction with your other income. The eligibility rules leave no room for error, and a mistake can lose the NUA treatment, so confirm the details with a qualified advisor before acting.

When to use this tool

Use it to estimate the tax on a lump-sum distribution of employer stock, compare NUA with a full IRA rollover, or see how much of a concentrated company stock position is left after tax. Recalculate when a distribution becomes a real option, since rates and circumstances change.

This is general information only and not financial advice.

About This NUA Calculator

Use this NUA calculator to get an instant estimate based on the figures you enter. Adjust the inputs above to match your situation, or browse all our calculators to plan your next step.