Small Business Tax Credit from SECURE Act 2.0
January 19, 2022
As part of the SECURE Act 2.0, the tax credit for a small business with less than 100 employees starting up a qualified retirement plan beginning in 2023 and thereafter has been improved. There has previously been a credit for the startup costs, but it was limited to the lesser of 50% of the start-up costs and the greater of $500 or $250 x the number of employees (limited to $5,000). For 2023, the credit is now changed to allow 100% of the start-up costs, with the other limitations remaining unchanged. The credit is phased out by 2% for every employee over 50, with full phase out at 100 employees.
For plans starting in 2023, the Act also grants a credit of up-to $1,000 per employee for the employer matching contributions on behalf of employees making less than $100,000 per year. This credit is available at 100% for the first and second year of the plan, 75% for the 3rd year, 50% for the 4th year, 25% for the 5th year and 0% after.
If you are a small business employer that has been on the fence of whether to start up a plan, these could be good incentives to start one up in 2023! Contact us today to learn more.