🔹 What is Net Unrealized Appreciation (NUA)?
NUA stands for Net Unrealized Appreciation, and it’s a tax strategy that applies to employer stock held in a workplace retirement plan (like a 401(k)).
NUA is the increase in value of company stock held in a tax-deferred retirement account from the time it was purchased/contributed to the plan to the time it is distributed.
NUA allows you to take advantage of preferential long-term capital gains tax rates instead of ordinary income tax rates on part of your distribution.
🔹 How the NUA Strategy Works
You have company stock in your 401(k).
When you retire or leave the company, you:
Take a lump-sum distribution of the entire 401(k).
Transfer the company stock to a taxable brokerage account.
The cost basis (original value) of the stock is taxed as ordinary income.
The NUA portion (the growth in value) is taxed as long-term capital gains only when you sell the stock.
🔹 How to Model NUA in the Boldin Platform
Create a 401k account. This account should hold the cost basis of your company stock. This account will allow you to:
model the untaxed cost basis
move that amount to an after-tax account
create ordinary income tax on the cost basis
Create an after-tax account (taxable brokerage account) with the capital gains tax treatment.
Set the turnover and dividend rate to 0%
Add the capital gains portion of the NUA. This is the portion that will not be taxed when you do the rollover of your NUA.
Add a Transfer FROM the 401k account to the after-tax account.
This will allow you to model income tax on only the cost basis.
Validate the gross taxable income and income tax liability in Insights > Taxes.