IRC section 409A. US startups
What does a 409A valuation cost?
The per-report price is the small half of the question. A startup that raises twice in three years needs five 409A valuations: one a year to stay inside the regulation's 12-month window, plus one after each material event. At $2,000 a report that is $10,000 over three years, about $3,333 a year. Enter your own quoted price and funding plan to see your number.
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
What this is based on
- Why the count matters more than the price. For stock that is 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", and that using a previously calculated value is not reasonable if it fails to reflect later information that may materially affect value, or 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 sitting inside the range of the list prices that 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 and 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 independent information site operated by Ellul Solutions Ltd. 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.
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.
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Worth knowing
Every figure sourced and dated.
409A valuation cost: published prices and price drivers
Nobody publishes a market rate for 409A valuations. Here are the list prices three providers publish today, checked 15 August 2026, and the factors that move a quote.
What section 409A actually requires of a startup
The 409A rule in plain terms: reasonable valuation method, the three safe harbor presumptions, the 12-month limit, and the 20 percent additional tax that hits employees.
When do you need a new 409A valuation?
Two triggers matter: the 12-month age limit on the safe harbor appraisal, and any material event that makes an earlier calculation unreliable. What counts as material.
Questions, answered directly
How much does a 409A valuation cost in 2026?
There is no published market rate, because no government body sets one. Among providers publishing list prices, checked 15 August 2026, Eqvista lists stage-based bundles from $990 to $2,590 a year, Cake Equity lists a $1,500 add-on to any plan, and Pulley includes 409A valuations in a $3,500 a year Growth plan. Those are platform bundles; boutique appraisal firms and national accounting firms quote instead of listing, and late-stage work costs materially more.
How many 409A valuations will I actually need?
Budget for one per year plus one after each material event. A startup raising twice in three years should plan for five, which at an assumed $2,000 a report is $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 information materially affecting value.
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, a qualifying formula price, or a good faith written valuation of illiquid start-up stock prepared 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 and 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 allows a valuation made reasonably and in good faith, evidenced by a written report, but only where it is performed by someone the company reasonably determines is qualified, which the regulation describes as generally at least five years of relevant valuation, accounting, banking, private equity or comparable industry experience. It also does not apply where a change in control is anticipated within 90 days or an IPO within 180 days.
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.
Budget the whole schedule, not one report.
Your quoted price, your funding plan, and the count the regulation actually forces.
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