IRC section 409A. US startups
What does a 409A valuation cost?
The per-report price is the small half. A startup raising twice in three years needs five 409A valuations: one a year, plus one per material event. At $2,000 a report: $10,000 over three years, about $3,333 a year.
12 months
maximum age of an independent appraisal for the safe harbor presumption of reasonableness
20%
additional tax on the employee, plus premium interest, if a 409A failure is found
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What this is based on
- Why the count matters more than the price. For stock not readily tradable on an established securities market, the regulation says fair market value means "a value determined by the reasonable application of a reasonable valuation method".
- Using a previously calculated value is not reasonable if it fails to reflect later information that may materially affect value.
- Nor is it reasonable if "the value was calculated with respect to a date that is more than 12 months earlier than the date for which the valuation is being used" (Treas. Reg. 1.409A-1(b)(5)(iv)(B)(1)). That is where the annual refresh and the event-driven refresh both come from.
- The independent appraisal safe harbor. The regulation presumes a valuation is reasonable where it is "determined by an independent appraisal that meets the requirements of section 401(a)(28)(C) and the regulations as of a date that is no more than 12 months before the relevant transaction to which the valuation is applied".
- The IRS may rebut that presumption only by showing the method or its application was "grossly unreasonable" (Treas. Reg. 1.409A-1(b)(5)(iv)(B)(2)(i)).
- Prices are market prices, not published rates. No government body sets or publishes a 409A fee. The $2,000 default is a round assumption inside the range of the list prices providers publish today, and it is not a statistic. Ask for a written quote and use that instead: the calculator is only as good as the number you put in.
- The count is an upper bound. Adding one valuation per year and one per material event slightly over-counts, because a valuation performed after an event also restarts the 12-month window. Treat the figure as a budgeting ceiling rather than a schedule, and take the schedule from counsel.
- Not included. Cap table software, ASC 718 stock compensation expense reporting, audit support, secondary or tender offer valuations, QSBS attestations and state filings. Several providers bundle some of these with the 409A, which is exactly why comparing headline prices between them is misleading.
- What is at stake if it goes wrong. Where a nonqualified deferred compensation plan fails section 409A, the deferred compensation is included in gross income. The tax is increased by premium interest plus "an amount equal to 20 percent of the compensation which is required to be included in gross income" (26 U.S.C. 409A(a)(1)(B)).
- The cost falls on the option holder, which is why underpricing a strike price is an employee problem before it is a company problem.
- This is general information about a US federal tax rule, not tax or legal advice, and it does not address state law. Talk to your counsel and your accountant before you rely on any of it.
409A Cost is an information site. It is not affiliated with the IRS, the US Treasury, or any valuation provider named on this site, and nothing here is tax, legal or accounting advice. Provider prices are the list prices those providers published on their own pages on the date shown; they are market prices, not published rates, and they change without notice. Confirm your own position with your counsel and your accountant.
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409A valuation budget by funding scenario
Last updated
How many 409A valuations a US startup has to buy over a planning horizon, and what that costs at an assumed $2,000 a report. The count comes from the regulation. The price is an assumption you should replace with your own quote.
Every row is this page's own calculator: one valuation per year of the horizon, to stay inside the 12-month window the presumption of reasonableness in Treas. Reg. 1.409A-1(b)(5)(iv)(B)(2)(i) requires, plus one after each material event, because the same regulation treats a previously calculated value as unreasonable if it fails to reflect later information materially affecting value. The $2,000 unit price is an assumption chosen inside the range of list prices providers publish today, not a published rate; no government body sets 409A fees. Counts are an upper bound, since an event-driven valuation also restarts the 12-month clock.
| Scenario | Valuations to budget for | Total at $2,000 each | Average per year |
|---|---|---|---|
| 1 year, no financing | 1 | $2,000 | $2,000 |
| 1 year, one priced round | 2 | $4,000 | $4,000 |
| 3 years, no financing | 3 | $6,000 | $2,000 |
| 3 years, two priced rounds | 5 | $10,000 | $3,333 |
| 5 years, three priced rounds | 8 | $16,000 | $3,200 |
| 5 years, five material events | 10 | $20,000 | $4,000 |
- The 409A regulation gives a presumption of reasonableness to an independent appraisal dated no more than 12 months before the grant it is used for, which is why an annual refresh is the baseline rather than an upsell.
- A startup raising twice in three years should budget for five 409A valuations, one per year plus one per material event, which at an assumed $2,000 a report is $10,000 over the period.
- Where a plan fails section 409A, the statute adds premium interest plus an amount equal to 20 percent of the compensation required to be included in gross income, and that additional tax falls on the option holder.
Cite this page
“409A valuation budget by funding scenario”, 409A Cost, https://409acost.com/ (updated 2026-08-15). Every row is this page's own calculator: one valuation per year of the horizon, to stay inside the 12-month window the presumption of reasonableness in Treas. Reg. 1.409A-1(b)(5)(iv)(B)(2)(i) requires, plus one after each material event, because the same regulation treats a previously calculated value as unreasonable if it fails to reflect later information materially affecting value. The $2,000 unit price is an assumption chosen inside the range of list prices providers publish today, not a published rate; no government body sets 409A fees. Counts are an upper bound, since an event-driven valuation also restarts the 12-month clock.
Questions, answered directly
How much does a 409A valuation cost in 2026?
No government body sets a market rate. 8 of 44 providers' pages read on 12 October 2026 publish a price; the 7 for one valuation run $499 to $1,800, median $1,499. Eqvista, Cake Equity and Pulley sell platform bundles, $990 to $3,500 a year, checked 15 August 2026. Boutique and national accounting firms quote instead; late-stage work costs materially more.(409A Price Index, 8 of 44 providers' pages publishing a price, read 12 October 2026)
How many 409A valuations will I actually need?
Budget for one a year plus one after each material event. A startup raising twice in three years should plan for five: at an assumed $2,000 a report, $10,000. The annual part comes from the 12-month limit on the safe harbor appraisal. The event part comes from the rule that a previously calculated value must reflect later material information.
What is the 409A safe harbor?
A presumption that a valuation is reasonable, which the IRS can only rebut by showing the method or its application was grossly unreasonable. There are three routes: an independent appraisal meeting the section 401(a)(28)(C) requirements dated within 12 months, or a qualifying formula price. The third is a good faith written valuation of illiquid start-up stock by a qualified person.
What happens if we grant options below fair market value?
The option can be treated as nonqualified deferred compensation that fails section 409A. The statute then includes the deferred compensation in the holder's gross income. It increases the tax by interest at the underpayment rate plus one percentage point, plus an amount equal to 20 percent of that compensation. The additional tax falls on the employee.
Can we do a 409A valuation ourselves?
The illiquid start-up presumption covers a valuation made reasonably and in good faith, in a written report. The preparer must be someone the company reasonably determines is qualified: generally at least five years of valuation, accounting, banking, private equity or comparable industry experience. It does not apply if a change in control is anticipated within 90 days, or an IPO within 180.
Does the price of the report affect the safe harbor?
No. Nothing in the regulation turns on fee level. What matters is that the appraisal meets the stated requirements, that it is recent enough, and that it reflects all material information. A cheap report that is current and complete is worth more than an expensive one that is stale.
Sources
This site's own datasets, every figure quoted from its source and dated:
- The median published figure in the 409A Price Index is 1,499.50 USD across 8 sources' own pages (range 499 to 1,800 USD; 9 sources publish a figure, some priced per year), read 11 November 2026.
- The 409A Safe Harbor Rules carries 8 published figures read from 5 sources' own pages, from 30 to 90 day, read 8 November 2026.
- Treas. Reg. 1.409A-1, definitions and the stock valuation rules, eCFR
- 26 U.S.C. 409A, inclusion in gross income of deferred compensation (Cornell LII)
- IRS. Internal Revenue Bulletin 2007-19, T.D. 9321, final section 409A regulations
- IRS Notice 2005-1, first guidance under section 409A
- Eqvista pricing page (list prices checked 15 August 2026)
- Cake Equity pricing page (list prices checked 15 August 2026)
- Pulley pricing page (list prices checked 15 August 2026)
Budget the whole schedule, not one report.
Your quoted price, your funding plan, and the count the regulation actually forces.
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