Net Unrealized Appreciation (NUA) Calculator

Net Unrealized Appreciation (NUA) Calculator

When you receive a lump sum distribution¹ from your retirement plan that includes employer stock, you'll need to decide whether to take advantage of special tax rules that apply to net unrealized appreciation (NUA)². Typically, your options will include (a) electing NUA treatment and selling the stock after a specified holding period³, (b) electing NUA treatment, selling the stock immediately, and reinvesting the net proceeds⁴, or (c) forgoing special NUA treatment and rolling the distribution over into a traditional IRA.

This calculator lets you compare the after-tax results of these three scenarios.

Information about stock distribution

Fair market value at time of distribution

Taxable cost basis (as provided by plan)

Nontaxable cost basis (as provided by plan)*

*Employee after-tax contributions

Estimated holding period before sale of stock

Years

Expected annual rate of return on stock/investments (0% to 10%)

Tax Rates

Current federal income tax rate

Estimated future income tax rate

Current long-term capital gains rate

Estimated future long-term capital gains tax rate

Early distribution penalties

Apply 10% early distribution penalty at time lump sum is paid?

For calculating tax on your stock basis. In general, the penalty does not apply if you'll be age 55 or older in the year you terminated employment, or if you're self employed or disabled.

Apply 10% early distribution penalty at end of holding period?

For calculating tax on your IRA distribution. In general, the penalty does not apply if you're age 59½ or older when your IRA is paid out. Other exceptions--for example, disability--may also apply.

¹A lump sum distribution is generally a distribution, within a single tax year, from all your employer's qualified plans of the same type. The distribution must be paid after you reach age 59½, or as a result of your separation from service (if you are an employee), or permanent disability (if you are self-employed), or death.

²In general, if NUA tax treatment applies, your stock's cost basis is taxed currently at ordinary income tax rates. Any unrealized appreciation at the time of distribution from the plan (NUA) is taxed at long-term capital gains rates when you sell the stock (regardless of how long you hold the stock). Any additional stock appreciation in excess of NUA is taxed when you sell the stock at long-term or short-term capital gains rates, depending on your holding period. (This calculator assumes that any additonal stock appreciation will be taxed at long-term rates.)

³For scenario (a), the calculator assumes you will sell enough shares of stock to pay the immediate income taxes due on the stock's cost basis.

⁴Scenario (b) assumes you reinvest the proceeds in a capital asset that you sell at the end of the holding period.