Net Unrealized Appreciation (NUA)
Is some of your retirement income eligible for a lower tax rate through Net Unrealized Appreciation?
Special treatment of employer stock within a qualified retirement plan allows for a distribution to be treated as part ordinary income and part long-term capital gains – potentially saving you a substantial amount of money. The NUA tax strategy can indeed be beneficial, but it isn’t right for everyone as there are many other considerations to first examine to decide if NUA would be beneficial to your retirement finances overall.
Net Unrealized Appreciation (NUA)
Is some of your retirement income eligible for a lower tax rate through Net Unrealized Appreciation?
Special treatment of employer stock within a qualified retirement plan allows for a distribution to be treated as part ordinary income and part long-term capital gains – potentially saving you a substantial amount of money. The NUA tax strategy can indeed be beneficial, but it isn’t right for everyone as there are many other considerations to first examine to decide if NUA would be beneficial to your retirement finances overall.
How does NUA work?
If your 401(k) includes employer stock, you may be eligible to have that portion of your retirement income taxed as long-term capital gains by moving those shares into a non-retirement account after a qualifying event. Instead of paying ordinary income tax on the full distribution at rates up to 37%, you could pay favorable capital gains rates as low as 0%. This could result in significant tax savings in some instances.
Eligibility for NUA
There are requirements for Net Unrealized Appreciation, including the way the employer stock is distributed and whether or not a triggering event has occurred. Triggering events can include (but are not limited to) reaching age 59 ½, disability or separation from the company that issued the stock.
Eligibility for NUA
There are requirements for Net Unrealized Appreciation, including the way the employer stock is distributed and whether or not a triggering event has occurred. Triggering events can include (but are not limited to) reaching age 59 ½, disability or separation from the company that issued the stock.
Our Tax Planning Team Steps In
Our tax planning team is involved in from the beginning to the preparation of the tax return. The entire plan is managed and a tax review completed, keeping your long-term objectives in mind.
NUA Special Considerations
Some individuals may have a significant amount of employer shares eligible for NUA, our team can help identify how many, and which specific shares, would be the most beneficial to use. The sole focus on NUA shouldn’t be on reducing your tax obligation, as there is so much more to consider, including accelerated tax liability. From increased capital gains tax rates to increased Medicare premiums, Net Unrealized Appreciation should only be utilized when it makes sense with the rest of your unique financial picture.
Why Should You Enlist Our Help with Net Unrealized Appreciation?
Help with understanding NUA requirements
Help with asking the right questions of your HR department/plan sponsor
Guidance on if NUA is a good fit
Advice on execution of NUA
Additional guidance on tax strategies for retirement
For a comprehensive review of your personal situation, always consult with a tax or legal advisor. Neither Cetera Advisor Networks LLC nor any of its representatives may give legal or tax advice.
Tax preparation services offered through Carson Group Advanced Solutions, LLC.