A one-time election available when employer stock inside a 401(k) is distributed in-kind — letting the stock’s appreciation escape ordinary-income tax entirely in favor of the lower capital gains rate.
How it works
Only the stock’s original cost basis is taxed as ordinary income at distribution. The appreciation since purchase — the NUA — is taxed at long-term capital gains rates whenever it’s eventually sold, regardless of the actual holding period inside the plan.
What this does not include
NUA requires a genuine triggering event (reaching 59½, separation from service, death, or disability) and a full distribution of the entire retirement plan balance within the same tax year — eligibility rules this calculator doesn’t verify, only the dollar benefit once eligible.
How to use this calculator
- Enter the cost basis of the employer stock and its current market value.
Frequently asked questions
Why does the holding period not matter for NUA gains?
Per IRS Notice 98-24, the NUA is always taxed at long-term capital gains rates when eventually sold, regardless of how long the stock was actually held inside the plan.
What if the stock hasn’t appreciated much?
NUA offers little benefit if there’s minimal appreciation — a standard rollover to an IRA may make more sense when cost basis and market value are close together.
Does NUA apply to a Roth 401(k)?
No — the stock must be in a tax-deferred account; Roth accounts already provide tax-free qualified withdrawals, so the NUA strategy offers no additional benefit there.
