From a tax perspective, participating in a nonqualified deferred compensation plan is an effective tax planning strategy when the employee anticipates that her marginal tax rate will be higher when she receives the deferred compensation than when she defers the compensation.

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Participating in a nonqualified deferred compensation plan is more beneficial tax-wise when the employee anticipates that her marginal tax rate will be lower when she receives the deferred compensation than when she defers it, allowing for tax savings.

From a Tax Perspective, Participating in a Nonqualified Deferred Compensation