If you have built up company securities within your employer-sponsored retirement plan, you may find yourself with a range of choices when the time comes to take a distribution. If those securities have experienced appreciation, it's worth considering the potential benefits of utilizing the net unrealized appreciation (NUA) tax treatment.
Remember, this article is for informational purposes only and is not a replacement for real-life advice. Make sure to consult your tax professional to get more detailed information on any company stocks you may own and how unrealized appreciation may be used.
Net unrealized appreciation is actually a pretty simple concept, but the execution can be difficult to understand. If you choose to invest in your company's stock and the stock increases in value over time, the difference between the original cost basis (the price at which the stock was purchased) and the current market value of the stock is the NUA.1
For example, if you were issued employer stock at $20 per share and it is now worth $50 per share, you would have an NUA of $30 per share ($50 - $20 = $30).1
To qualify for the tax treatment associated with NUA, the distribution must meet the criteria for a lump-sum distribution.1
The NUA strategy may not always be the best choice. Here are a few reasons why:
1. Ameriprise.com, April 2023 2. Forbes.com, September 8, 2021 3. Kiplinger.com, April 26, 2022
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