Unlocking Tax Credits for Small Business Owners: How the SECURE Act Can Help You Save

By Todd Pouliot, AIF

As a small business owner, offering a retirement plan to your employees is a great way to

attract and retain top talent while also securing your own financial future. However, the costs associated with setting up and maintaining a retirement plan can feel overwhelming. Fortunately, the SECURE Act provides valuable tax credits to make it easier and more affordable for small businesses to offer a 401(k) plan.

If you’ve been considering starting a retirement plan for your business, these tax incentives could be the push you need to take the next step. Here’s what you need to know:

Tax Credits for New Retirement Plans

Startup Costs Tax Credit

For businesses that start a new retirement plan, the SECURE Act offers a tax credit to help cover administrative costs:

• Businesses with 50 or fewer employees who earn $5,000 or more annually receive a 100% tax credit for plan setup costs (50% tax credit for businesses with 51-100 employees).

• The credit is $250 per eligible employee, up to a maximum of $5,000 per year.

• This credit applies to the first three tax years of the plan.

  
  

Employer Contribution Tax Credit

If your business is offering a retirement plan for the first time and you decide to contribute to your employees’ accounts, you may qualify for additional credits:

• A tax credit is available based on the amount contributed by the employer.

• The credit applies to contributions up to $1,000 per employee.

• This benefit phases out over five years, decreasing each year.

  
  

Automatic Enrollment Tax Credit

Automatic enrollment encourages employees to participate in their retirement plan by enrolling them by default unless they opt-out. To encourage this feature:

• Businesses that add automatic enrollment to their new or existing plan receive a $500 tax credit.

• This credit applies for three tax years.

• Automatic enrollment is now required for many new plans under recent updates.

  
  

Why This Matters for Small Business Owners

By taking advantage of these SECURE Act tax credits, small business owners can offset up to 100% of the costs associated with launching and maintaining a retirement plan. This not only makes it more affordable to support your employees' financial well-being but also helps your business stay competitive in attracting and retaining talent.

If you’re a Nordonia Chamber of Commerce member looking to explore retirement plan options for your business, now is the perfect time to take advantage of these savings. A well-structured retirement plan can be a win-win for both you and your employees!

Need help getting started? Reach out to a financial professional who can guide you through the options available for your business.

For more reading on What type of Tax Planning do I need? 5 most common items, click the link or visit us at www.mygatewaymoney.com. 

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