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Tax Increases That Affect Your Planning For Nonqualified Deferred Compensation

The capacity for tax planning is one of the main benefits that make nonqualified plans appealing. When tax rates increase, the advantages of NQDC plans also grow. This article explains the impact that the tax changes starting in 2013 have on NQDC planning.

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Key Points in This Article
Generally, the rise in tax rates increases the attractiveness of deferring income into the future through nonqualified plans.
Deferrals can keep your yearly taxable income below the thresholds for the new top tax rates on ordinary income (39.6%) and capital gains and dividends (20%), as well as income thresholds of the additional Medicare taxes.
Distributions from NQDC plans can cause your income to exceed these thresholds, triggering the tax increases.