Company stock in a 401(k) can use special NUA tax treatment. See if it beats a rollover.
Compares the after-tax cost of using Net Unrealized Appreciation on employer stock against rolling the same shares into an IRA.
NUA lets you pay ordinary income tax now on only the cost basis of company stock distributed from a workplace plan, while the appreciation is taxed later at long-term capital gains rates when you sell. If your basis is low relative to market value, taxing the gain at capital gains rates instead of ordinary rates can reduce total tax. The strategy generally requires a qualifying lump-sum distribution of the shares.
Rolling the shares into an IRA defers all tax, but every dollar later withdrawn is taxed as ordinary income, including the appreciation that NUA would have taxed more lightly. A rollover can still win when the gap between your ordinary and capital gains rates is small or when you value continued tax deferral and flexibility. This tool contrasts the two on a simple tax basis and ignores timing, state tax, and future rate changes.
NUA tends to help most when the cost basis is low and the gap between your ordinary rate and capital gains rate is wide. A large embedded gain taxed at capital gains rates is where the savings come from.
Yes, you pay ordinary income tax on the basis in the year the shares are distributed, and the appreciation is taxed only when you later sell. The rollover instead defers all tax until withdrawal.
No, NUA has strict eligibility rules and this tool is a simplified estimate. Consult a qualified tax advisor before acting.
See the exact formula and a worked example on our methodology page.