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myNQDC.com Alert (Jan. 16, 2013): Tax Act's Impact On Nonqualified Deferred Compensation
Editor's Note: The alert below concerns our sister website myNQDC.com, a resource about nonqualified deferred compensation that is a separate publication from myStockOptions.com. The alert was sent by email to registered users of myNQDC.com on Jan. 16, 2013.
For nonqualified deferred compensation, the American Taxpayer Relief Act has some impacts. In general, these enhance the appeal of deferring income into the future through nonqualified plans. The following potential tax increases apply to nonqualified deferred compensation with effect from January 1, 2013.
Advantages Of Nonqualified Plans
Generally, the rise in tax rates increases the attractiveness of deferring income into the future through nonqualified plans.
Each person's situation is different, however, and you should make projections involving various factors:
To make simple projections with these factors, try the calculator at myNQDC.com.
As explained in an FAQ at myNQDC.com, even though you may want to defer this year's expected income into the future, when your tax rates may be lower, you cannot change your deferral election for this year's compensation. Similarly, given the restrictions on redeferrals, you cannot move an income distribution that is scheduled for this year.
We are in the process of updating our content for recent tax-law changes (the calculator is fully updated). For additional coverage of tax changes taking effect in 2013, see the following FAQs on myNQDC.com:
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