How do I know if NUA is worth it for me?

NUA makes sense when your employer stock has significant appreciation (current value much higher than what you originally paid). The bigger the gap between cost basis and current value, the more you save by paying capital gains rates instead of ordinary income rates.

What is a "triggering event"?

You need one of these to qualify: separation from service (leaving your job), reaching age 59.5, disability, or death. You must take a lump-sum distribution of your entire plan balance in the same tax year as the triggering event.

Can I do NUA on just part of my employer stock?

No - you must take a lump-sum distribution of your entire retirement plan balance (all accounts with that employer) in one tax year. The stock goes to a taxable brokerage account, and non-stock assets can roll to an IRA.

What taxes do I pay with NUA?

You pay ordinary income tax only on the cost basis (what you originally paid for the stock). The appreciation (NUA amount) is taxed at long-term capital gains rates when you eventually sell - even if you sell immediately. Any growth after the distribution is taxed at short-term or long-term rates depending on holding period.

What's the alternative to NUA?

Rolling the stock to an IRA - but then all future withdrawals are taxed as ordinary income (up to 37%). With NUA, the appreciation is taxed at the lower capital gains rate (0-20%). For large appreciated positions, NUA can save tens of thousands.

Retirement

Net Unrealized Appreciation (NUA)

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advanced · $50K - $100K

If you have employer stock in your 401(k), you can distribute it in-kind (not sell), pay ordinary income tax only on what you originally paid, and pay long-term capital gains on all appreciation.

Can save 20%+ in taxes.

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Tax Benefit

Convert ordinary income to long-term capital gains

Requirements

Employer stock in employer-sponsored retirement plan
Triggering event (separation, age 59.5, disability)
Lump-sum distribution of entire plan
Stock has significant appreciation

How to Implement

1Calculate cost basis vs current value of employer stock
2Verify triggering event qualifies
3Distribute stock in-kind to taxable brokerage (not IRA)
4Pay ordinary tax on cost basis only
5Pay capital gains rate on NUA when sold

Frequently Asked Questions

Educational Only: This information is for educational purposes. Consult a qualified financial advisor or tax professional before implementing.

Last reviewed: April 2026

Related retirement strategies

Roth IRATax-free growth and withdrawals in retirement. The younger you start, the more powerful.Employer 401(k) MatchAn employer match adds employer money on top of your own contributions, up to a set limit.Backdoor Roth IRALegal workaround to contribute to Roth IRA when your income is too high.

Sources

Internal Revenue Service, Rev. Proc. 2025-32
2026 inflation-adjusted amounts (tax brackets, standard deduction, estate & gift, FSA, credits)
Internal Revenue Service, Notice 2025-67
2026 retirement plan limits (401(k), IRA, SIMPLE, catch-up)
Internal Revenue Service, Rev. Proc. 2025-19
2026 HSA and HDHP inflation-adjusted limits

Educational information only. Not financial, tax, or legal advice or a recommendation. Figures are drawn from the primary sources cited above; verify current amounts with the source before acting.