Congress has huffed and puffed, but it has yet to blow away a unique tax break for investing in your own company through your retirement plan.
Strategy: With retirement account investments in company stock, keep the stock until you’re ready to retire. Don’t convert this nest egg to cash or other securities.
Thanks to a tax law loophole, you only have to pay tax on the retirement plan’s original cost of the stock when the shares are paid out to you as part of a lump-sum retirement distribution. In other words, there’s no tax due on any appreciation in value—called “net unrealized appreciation” (NUA)—from the time your account acquired the stock. The NUA is 100% tax-free until you sell your shares, if ever.
Icing on the cake: Any subsequent gain on the NUA is treated as long-term capital gain as long as you’ve held the stock for more than one year. Currently, the maximum tax rate on long-term capital gain is 15% or 20% for tho...(register to read more)