Nua Calculator

Net Unrealized Appreciation (NUA) Calculator

Use this calculator to estimate the tax implications of utilizing Net Unrealized Appreciation (NUA) for employer stock distributed from your qualified retirement plan.

function calculateNUA() { var costBasis = parseFloat(document.getElementById("costBasis").value); var fmvDistribution = parseFloat(document.getElementById("fmvDistribution").value); var currentFmv = parseFloat(document.getElementById("currentFmv").value); var ordinaryTaxRate = parseFloat(document.getElementById("ordinaryTaxRate").value) / 100; var longTermTaxRate = parseFloat(document.getElementById("longTermTaxRate").value) / 100; if (isNaN(costBasis) || isNaN(fmvDistribution) || isNaN(currentFmv) || isNaN(ordinaryTaxRate) || isNaN(longTermTaxRate) || costBasis < 0 || fmvDistribution < 0 || currentFmv < 0 || ordinaryTaxRate < 0 || longTermTaxRate < 0) { document.getElementById("nuaResult").innerHTML = "Please enter valid positive numbers for all fields."; return; } if (fmvDistribution 0) { taxOnPostDistributionAppreciation = postDistributionAppreciation * longTermTaxRate; } else { // If post-distribution is a loss, it can offset other gains, but for simplicity here, we'll show 0 tax on this portion. // A real scenario would involve capital loss rules. taxOnPostDistributionAppreciation = 0; } // Total estimated tax liability if sold today var totalEstimatedTaxLiability = taxOnOrdinaryIncome + taxOnNUA + taxOnPostDistributionAppreciation; // Potential tax savings (NUA vs. treating NUA as ordinary income) var potentialNUATaxSavings = (netUnrealizedAppreciation * ordinaryTaxRate) – (netUnrealizedAppreciation * longTermTaxRate); var resultsHtml = "

Calculation Results:

"; resultsHtml += "Net Unrealized Appreciation (NUA): $" + netUnrealizedAppreciation.toFixed(2) + ""; resultsHtml += "Portion Taxable as Ordinary Income (at distribution): $" + taxableAsOrdinaryIncome.toFixed(2) + ""; resultsHtml += "Estimated Tax on Ordinary Income Portion: $" + taxOnOrdinaryIncome.toFixed(2) + ""; resultsHtml += "Estimated Tax on NUA Portion (when sold): $" + taxOnNUA.toFixed(2) + ""; resultsHtml += "Post-Distribution Appreciation/Depreciation: $" + postDistributionAppreciation.toFixed(2) + ""; resultsHtml += "Estimated Tax on Post-Distribution Appreciation (when sold): $" + taxOnPostDistributionAppreciation.toFixed(2) + ""; resultsHtml += "Total Estimated Tax Liability (if sold today): $" + totalEstimatedTaxLiability.toFixed(2) + ""; resultsHtml += "Potential Tax Savings from NUA Treatment: $" + potentialNUATaxSavings.toFixed(2) + ""; document.getElementById("nuaResult").innerHTML = resultsHtml; } .calculator-container { font-family: 'Segoe UI', Tahoma, Geneva, Verdana, sans-serif; background-color: #f9f9f9; padding: 25px; border-radius: 10px; box-shadow: 0 4px 12px rgba(0, 0, 0, 0.1); max-width: 700px; margin: 30px auto; border: 1px solid #e0e0e0; } .calculator-container h2 { color: #2c3e50; text-align: center; margin-bottom: 20px; font-size: 1.8em; } .calculator-container p { color: #555; line-height: 1.6; margin-bottom: 15px; } .calc-input-group { margin-bottom: 18px; display: flex; flex-direction: column; } .calc-input-group label { margin-bottom: 8px; color: #34495e; font-weight: bold; font-size: 1em; } .calc-input-group input[type="number"] { padding: 12px; border: 1px solid #ccc; border-radius: 6px; font-size: 1em; width: 100%; box-sizing: border-box; transition: border-color 0.3s ease; } .calc-input-group input[type="number"]:focus { border-color: #007bff; outline: none; box-shadow: 0 0 5px rgba(0, 123, 255, 0.2); } button { background-color: #28a745; color: white; padding: 14px 25px; border: none; border-radius: 6px; cursor: pointer; font-size: 1.1em; font-weight: bold; display: block; width: 100%; margin-top: 25px; transition: background-color 0.3s ease, transform 0.2s ease; } button:hover { background-color: #218838; transform: translateY(-2px); } .calc-result { margin-top: 30px; padding: 20px; background-color: #e9f7ef; border: 1px solid #d4edda; border-radius: 8px; color: #155724; font-size: 1.1em; line-height: 1.8; } .calc-result h3 { color: #155724; margin-top: 0; margin-bottom: 15px; font-size: 1.5em; } .calc-result p { margin-bottom: 10px; color: #155724; } .calc-result p strong { color: #0f3d1a; } .calc-result .error { color: #dc3545; font-weight: bold; background-color: #f8d7da; padding: 10px; border-radius: 5px; border: 1px solid #f5c6cb; }

Understanding Net Unrealized Appreciation (NUA)

Net Unrealized Appreciation (NUA) is a powerful tax planning strategy available to individuals who receive a lump-sum distribution of employer stock from a qualified retirement plan, such as a 401(k) or profit-sharing plan. This strategy can significantly reduce the tax burden on the appreciation of company stock held within these plans.

What is NUA?

When you receive a distribution of employer stock from your retirement plan, the general rule is that the entire value of the stock is taxed as ordinary income. However, with NUA, you can separate the "cost basis" (the original value of the stock when it was contributed or purchased in the plan) from the "net unrealized appreciation" (the increase in value from the cost basis up to the date of distribution).

  • Cost Basis: This portion is taxed as ordinary income in the year of distribution.
  • Net Unrealized Appreciation (NUA): This portion is taxed at the more favorable long-term capital gains rates only when you sell the stock, not at the time of distribution.
  • Post-Distribution Appreciation: Any further increase in the stock's value after the distribution date is also taxed at long-term capital gains rates when the stock is eventually sold.

Why is NUA Beneficial?

The primary benefit of NUA is the potential to convert what would otherwise be ordinary income (taxed at your marginal income tax rate, which can be as high as 37%) into long-term capital gains (taxed at lower rates, typically 0%, 15%, or 20%, depending on your income). This can lead to substantial tax savings, especially for individuals with highly appreciated employer stock.

Conditions for NUA Treatment

To qualify for NUA treatment, specific IRS rules must be met:

  1. Lump-Sum Distribution: You must receive the entire balance of your employer stock (and any other assets) from the plan within one tax year. This means all assets from all of the employer's qualified plans must be distributed within that year.
  2. Triggering Event: The distribution must occur due to a "triggering event," which includes separation from service, reaching age 59½, death, or total disability.
  3. Employer Stock: The assets must be employer securities (stock, bonds, or debentures of the employer corporation).

How the NUA Calculator Works

Our NUA calculator helps you estimate the tax implications by considering the following inputs:

  • Original Cost Basis of Stock: The total amount your employer (or you, if through contributions) paid for the stock within the retirement plan.
  • Fair Market Value (FMV) at Distribution: The total market value of the stock on the exact date it was distributed from your plan.
  • Current Fair Market Value (FMV) of Stock: The current market value of the stock if you were to sell it today, after distribution. This helps calculate the total capital gains.
  • Ordinary Income Tax Rate: Your estimated marginal federal ordinary income tax rate.
  • Long-Term Capital Gains Tax Rate: Your estimated federal long-term capital gains tax rate.

The calculator then provides outputs such as the NUA amount, the portion taxed as ordinary income, the estimated tax on each portion, and the potential tax savings compared to treating the entire distribution as ordinary income.

Important Considerations

  • Rollover Option: If you don't elect NUA, you can typically roll over the entire distribution (including the appreciated stock) into an IRA. While this defers taxes, all future distributions from the IRA will be taxed as ordinary income.
  • Diversification: Holding a large concentration of employer stock carries significant risk. NUA can be a great strategy, but it's crucial to consider your overall investment diversification strategy.
  • State Taxes: This calculator focuses on federal taxes. State income and capital gains taxes can also apply and vary significantly.
  • Professional Advice: NUA is a complex tax strategy. This calculator provides estimates for informational purposes only. Always consult with a qualified financial advisor or tax professional to determine if NUA is appropriate for your specific situation.

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