Do you have a small business? Do you like to save money, especially in taxes? Have you considered setting up a retirement plan for you and your employees, but did not want to spend the money and time getting one set up? Then I have news for you!
Starting in 2020, the SECURE Act is increasing the credit for plan start-up costs to make it more affordable for small businesses (100 employees or less) to set up retirement plans. This tax credit is intended to help small employers cope with the financial costs of starting or maintaining a workplace retirement savings plan as a way of increasing access to (and participation in) such programs.
The credit is increased by changing the calculation of the flat dollar amount limit on the credit to the GREATER of:
- $500, or
- the lesser of:
- $250 multiplied by the number of non-highly compensated employees of the eligible employer who are eligible to participate in the plan, or
The credit applies for up to three years. These tax credits are non-refundable, so they can only be used to reduce tax owed.
This can be a great benefit to offer your employees to help set themselves up for retirement. Dive in, explore this new incentive to see how it can benefit your small business. These credits are there for the taking.
Note: This applies to new pension plans. But it appears that employers who put a new plan in place in 2019 (or earlier) can increase their credit for 2020 (and later) years, so long as they are still within the three-year start-up period to which the credit applies.
Please contact your Henry+Horne adviser with any questions regarding SECURE Act changes or taxes in general.