What is Net Unrealized Appreciation (NUA) on employer stock in my 401(k)?

NUA is a special tax break for company stock held inside your 401(k) that has grown a lot in value. Normally, every dollar leaving a traditional 401(k) is taxed as ordinary income. But with an NUA strategy, you move the actual shares (not cash) into a taxable brokerage account in a single lump-sum distribution. You pay ordinary income tax only on the stock's original cost basis — what you paid for it. The appreciation, the NUA, is then taxed at lower long-term capital gains rates when you eventually sell, regardless of how long you've held it. For someone with highly appreciated employer stock, this can save substantial tax versus rolling everything to an IRA. The rules are strict — it must be a qualifying lump-sum distribution — so coordinate the timing carefully and consider professional guidance before executing.