Congress sweetened the pot for small businesses when it passed SECURE 2.0 at the end of 2022 with the following provisions:
Tax credit for startup costs gets better
SECURE 2.0 greatly enriched the tax credit for small employer plan startup costs by allowing employers with 50 or fewer employees to take a credit for 100% of their eligible startup costs. An eligible employer with 51 to 100 employees may claim a tax credit for 50% of eligible startup costs. The tax credit may be claimed for three years, up to $5,000 per year.
New tax credit for employer contributions
SECURE 2.0 also established a new tax credit for making employer contributions up to $1,000 per eligible employee per year for five years. The amount of the tax credit depends on the number of employees and number of years after plan startup. Review our Client Q&A about the tax credit for more details. If you think you may qualify, we recommend that you consult your tax advisor about claiming tax credit.