Now we will discuss when to use NUA treatment.
You should consider the following factors as you decide whether to roll all your assets into an IRA or to transfer company stock separately into a taxable account:
- Tax rates. The larger the difference between the ordinary income tax rate and the long-term capital gains tax rate, the greater the potential tax savings of electing NUA tax treatment of company stock.
- Absolute NUA. The larger the dollar value of the stock's appreciation, the more the NUA rules can save you on taxes.
- Percentage of NUA. An NUA that is a higher percentage of total market value creates greater potential tax savings because more of the proceeds will be taxed at the lower capital gains rate and less will be taxed at income tax rates.
- Time horizon to distribution. The longer you plan to keep your assets invested in an IRA, the greater the potential benefit of that account's tax-deferred growth. A shorter time frame makes the NUA election more attractive.
Please consult your tax advisor for more details, this blog series is for information only.