Microsoft Deferred Compensation Resources
How does Deferred Compensation work at Microsoft?
Deferred Compensation is an opportunity to save and invest dollars on a pre-tax basis, similar to your 401(k), available to employees who are Level 67 and above. Contributions to your DCP reduce taxable income and are invested in mutual funds that are aligned with your goals.
Your compensation at Microsoft will come from your salary, cash bonuses, and stock awards. You have no control over when your shares vest – and when that happens, taxes are due. This can mean a huge increase to your annual tax bill. You can control the percentage of salary and cash bonus that is taxed each year, by deferring this compensation to a later date when your tax rate is lower.
You can defer up to 75% of your salary and up to 100% of your cash bonus – reducing your overall yearly income and your tax bracket.
Deferred Compensation On-Demand Webinar
In this webinar we walk through an example of how the benefit works, share considerations for your payout strategy, and show examples of how to establish tax-efficient payout strategies.
We answer some of these common questions:
- How much income you should defer?
- Will future income sources affect your DCP payout?
- What mistakes should you avoid?
- Can you correct mistakes on your deferrals?
May 1 – 31
Elect to defer up to 100% of next year’s bonus
November 1 – 30
Elect to defer up to 75% of next year’s salary
Let’s Look at an Example for a Level 67
VESTING MSFT SHARES
If you receive all of this income in a single year, you’re being taxed in the highest bracket, and would pay a projected tax bill of $200,000-$250,000. However, if you defer some of this compensation, you can lower your overall tax bill significantly.
Our example employee decides to max out their 401(k) for the year, contributing $19,500, lowering their tax bill by approximately $7,000 – small change compared to the overall bill. In addition, however, they decide to defer $150,000 in salary and cash bonus. Here is where the magic happens!
By deferring $150,000, they reduce their yearly compensation and instead pay approximately $55,000 less in taxes per year.
See for Yourself – Schedule Your Deferred Comp Strategy Session
We will show you how to reduce thousands of dollars in taxes while building a comprehensive strategy for managing present and future cashflow.
- Discover how you can save thousands of dollars in taxes
- Learn how to maintain cashflow to ensure your day-to-day lifestyle expenses are covered each month
- Enroll before deadline
- Develop a comprehensive payout strategy
- Leverage the Microsoft DCP program with your other compensation benefits
Deferred Comp Video Resources
Make the most of your Deferred Compensation plan
Questions about Microsoft Deferred Compensation?
The Microsoft DCP benefit is one of the most complicated to implement and manage. It requires careful planning and monitoring to ensure current and future cash needs are met with considerations in place to reduce future tax liabilities. We encourage you to schedule 30-minutes with one of our Advisors to ask your questions.