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Credit for Start-Up Costs Related to Retirement Plan

September 19, 2017

If you are a small employer who recently established a retirement plan for your employees (or are thinking of setting one up), you may be eligible for a tax credit related to your implementation costs.

The tax credit is available to employers who:

  • Had 100 or fewer employees who received at least $5,000 of compensation in the preceding year,
  • Have not established or maintained a qualified employer plan within the last three years for substantially the same employees, and
  • Have one plan participant who is a non-highly compensated employee (earned less than $120,000 in the previous year and does not own 5% or more of the company)

The amount of the credit is 50% of your ordinary and necessary costs to set up and administer the plan (up to a maximum credit of $500 per year), and can be claimed for the first three years of the plan. Costs incurred to educate your employees about the plan also qualify for the credit.

Eligible retirement plans include SEP IRAs, SIMPLE IRAs and qualified plans (such as 401(k), profit sharing, and defined-benefit plans).

If you are considering establishing a retirement plan for your employees, please contact your SVA advisor to learn more about this tax credit.