NUA Net Unrealized Appreciation Calculator
Decide whether to use the Net Unrealized Appreciation (NUA) tax strategy on company stock held in your 401(k), or roll the stock into a traditional IRA. NUA pays ordinary income tax only on the cost basis at distribution, with the appreciation taxed at long-term capital gains rates. 2026 brackets.
What Is the NUA Strategy?
Net Unrealized Appreciation is a special tax election under IRC §402(e)(4) that lets you take employer-company stock out of a qualified retirement plan (401(k), ESOP, profit-sharing) at a lump-sum distribution. You pay ordinary income tax only on the original cost basis, not on the full market value. The appreciation — the "NUA" — is then taxed at preferential long-term capital gains rates when you eventually sell the shares, regardless of how long you actually hold them after distribution. For employees with low cost basis and large appreciation in employer stock, this can save tens of thousands in lifetime taxes (source: IRS Topic 412).
NUA Eligibility Requirements
To qualify, the distribution must meet ALL of these: (1) Triggering event: separation from service, age 59½, death, or disability. (2) Lump-sum distribution: the entire balance of the qualified plan must be distributed in a single tax year. (3) Direct stock distribution: the company stock must be distributed in-kind (as actual shares), not sold inside the plan first. (4) Qualified plan only: NUA does not apply to IRAs, 403(b)s, or 457(b)s. If you violate any rule (e.g., do a partial rollover then later distribute remaining stock), NUA is disallowed and you owe ordinary tax on the entire value.
When NUA Wins vs Rollover
NUA is most powerful when: (1) cost basis is low relative to current value (under 30%), (2) ordinary income tax bracket is high (32%+), (3) LTCG bracket is meaningfully lower (15% vs 32%), and (4) you plan to sell the stock in the foreseeable future to fund retirement. The IRA rollover wins when: (1) cost basis is high relative to current value (over 50%), (2) you plan to keep deferring growth tax-free for decades, (3) you want to diversify out of the stock immediately (rollover then sell is tax-free inside IRA), and (4) you want stretch-IRA or QCD options later. The breakeven generally requires NUA value > 50% of total stock value to clearly favor NUA.
2026 Tax Rate Considerations
2026 ordinary brackets remain at 10/12/22/24/32/35/37% under the OBBB extension. LTCG rates are 0% (under $47,025 single / $94,050 MFJ taxable income), 15% (up to $518,900 single / $583,750 MFJ), and 20% above. The 3.8% Net Investment Income Tax adds on top when MAGI exceeds $200K single / $250K MFJ. State tax usually applies at the same rate to both ordinary and LTCG (with notable exceptions: nine states have no income tax). Plan the NUA distribution in a year your other income is lower to drop into a smaller LTCG bracket and avoid NIIT.
NUA Pitfalls to Avoid
(1) Failed lump-sum: rolling some balance into IRA then distributing stock later voids NUA. (2) Pre-59½ basis tax: the basis amount is subject to 10% early withdrawal penalty if under 55 (separation) or 59½ (in-service). (3) State conformity: a few states tax NUA differently than federal. (4) Concentration risk: NUA preserves a single-stock concentration; weigh tax savings against diversification benefit. (5) Estate basis step-up: if you die holding NUA stock, the NUA portion does NOT get a basis step-up — heirs still owe LTCG on the original NUA. Compare with our 72(t) calculator, RMD calculator, inherited IRA 10-year rule, capital gains vs ordinary.
Last updated April 2026. Estimates only — consult a CPA before electing NUA. Sources: IRS Topic 412, IRC §402(e)(4), SSA.