Tax Credits for Start-up Retirement Plans
If you start a qualified retirement plan with auto-enrollment, your company may qualify to receive thousands in tax credits over a three-year period. A tax credit, different from a tax deduction, reduces the amount of taxes owed on a dollar-for-dollar basis. For example, when an organization in the 30% tax bracket receives a tax deduction of $1,000 it lowers its taxable income by $1,000, it saves $300 in taxes. If the organization received a tax credit, it could lower its taxes by $1,000.
Qualifications for eligibility:
- The company has 100 or fewer employees.
- The company has at least one plan participant who is not a highly compensated employee.
- In the three previous tax periods before the first year of eligibility, the employees did not receive contributions or accrued benefits in another plan sponsored by the company.