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Why A Quirk In The ‘Big Beautiful Bill’ Of 2025 Could Boost The Appeal Of NQDC Deferrals
by Bruce Brumberg

A novel phaseout in the 2025 tax law that involves the additional state and local tax (SALT) deduction may boost the appeal of deferring salary and bonuses via nonqualified deferred compensation (NQDC) plans.

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FAQs
What is the tax treatment of company-owned life insurance when my company pays part of the death benefit to my beneficiary?

When you have a separate agreement with your company to pay some portion of this money to your beneficiary…

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UPDATES! What is the tax treatment when the NQDC plan is set up to pay the benefits to my beneficiary upon my death?

If the plan is set up so that it will not pay any distributions during your lifetime, but will instead pay the deferred amounts in a lump sum at death to your named beneficiary, the value…

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More FAQs:
If my beneficiary gets NQDC distributions because I died before receiving them, does the beneficiary owe income tax or FICA taxes on them?
Is my NQDC part of my estate if I die before receiving all of the distribution(s)? What is the tax treatment?
Does the money in my NQDC plan count in the calculation when I convert a traditional IRA to a Roth IRA?
Can income from my NQDC distribution alone qualify me to establish an IRA?
Will NQDC distributions cause my Social Security benefits to be taxed?
Does NQDC affect the annual earnings limit of Social Security?
Can I roll over my distributions from the NQDC plan into an IRA and keep the tax-deferred status?
If the distribution is not made at the exact time specified in the plan, how much earlier or later than the scheduled distribution date can I receive the payment without being penalized?
I have started receiving Social Security payments. If I start receiving distributions from my NQDC plan, must I still pay Social Security tax on the income? Can this income cause my Social Security payments to be taxed too?
Can I get a private letter ruling from the IRS that my NQDC plan will not cause me to be immediately taxed?
UPDATES! I plan to move. What if I live in a different state at distribution than the state where I worked? How is the distribution taxed?
UPDATES! Can I (or my company) fix a tax mistake I made in deferring my income or in the distribution without being penalized?
Which tax rates apply to distributions I receive in company shares: ordinary income or capital gains? What is the value of the distributed shares based on?
UPDATES! Is my company’s tax deduction limited by Section 162(m) for distribution amounts over $1 million? How does this make NQDC more appealing?
Will I owe additional FICA taxes on the interest or earnings credited to my NQDC account when it is distributed?
When I receive distributions from my NQDC account, will I need to make estimated tax payments?
Are the tax rules, withholding, and tax return reporting for NQDC different if I am an independent contractor, consultant, or outside director and not an employee?
I am a US executive moving overseas to work. When I live outside the United States, does the tax treatment change for deferrals and distributions under my nonqualified deferred compensation plan?
UPDATES! When I file an extension to complete my tax return after the IRS deadline, are there any mistakes I should avoid that involve nonqualified deferred compensation?
How do the taxes under the Affordable Care Act affect my Medicare tax rate and my planning for nonqualified deferred compensation?
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