NUA (Net Unrealized Appreciation) calculator

Inputs

Company stock balance in 401(k)	$400,000
Original cost basis (your contributions)	$80,000
Ordinary income tax rate %	35%
Long-term capital gains rate %	20%
Years held after distribution	5
Expected post-distribution appreciation %	6%

Supporting metrics

NUA total tax (now + at sale)	$119,058
IRA rollover total tax (at sale)	$187,352

About this calculator

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.

FAQ

What's a 'qualifying event'?

Four triggers: (1) separation from service (you quit, retire, or are laid off), (2) reaching age 59½, (3) death, (4) disability per Sec 72(m)(7). Your lump-sum distribution must occur in the same year as the trigger event.

Should I do partial NUA?

Cannot — NUA requires lump-sum distribution of the ENTIRE 401(k) account in one year. Workaround: take entire 401(k), execute NUA on company stock, immediately roll the non-stock portion to an IRA via direct trustee-to-trustee transfer (must complete within 60 days; same year as distribution).

What if my company stock dropped recently?

NUA still applies but the math weakens — less appreciation = less tax savings. If your basis equals current value (no gain), NUA does nothing. If basis > value (loss), don't use NUA — recognize the loss via IRA rollover and let ordinary recapture work in your favor.