JULY Tax Credit Calculator
Secure 2.0 has made it more affordable than ever for a small business to start a 401(k) plan.
Current law provides for three different credits depending on your plan design.
1. Startup Tax Credit
- $250 per non-highly compensated employee for 3 years. Capped at lesser of startup costs or $5,000 annually.
- Up to 50 Employees - 100% of credit.
- More than 50 Employees - 50% of credit. No credit above 100 employees.
2. Automatic Enrollment Credit
- $500 per year for first 3 years.
- Start a new plan with automatic enrollment.
- Add automatic enrollment to existing plan.
- Up to 100 Employees.
3. Contribution Credit
- Up to $1,000 per employee for first 5 years. Limited to actual amount contributed.
- Up to 50 Employees - 100% of credit, but reduced each year over 5 years.
- More than 50 Employees - Amount of credit is reduced as employees increase. No credit above 100 employees.
Number of employees with compensation of at least $5,000
Number of eligible non-highly compensated employees (NHCE)
Estimated Annual Plan Administration Cost
Number of employees who earned less than $100,000 last year
Estimated budget for the employer contribution
| Tax Credit Items | Tax Year 1 | Tax Year 2 | Tax Year 3 | Tax Year 4 | Tax Year 5 |
|---|
| Startup Credit |
| Automatic Enrollment Credit |
| Contribution Tax Credit |
Secure 2.0 retirement plan credits are retroactive to the first tax year in which the plan was established. If you have an existing retirement plan, your organization may be able to continue to receive startup and automatic enrollment tax credits if your plan was established within the three-year window. In addition, your organization may be able to continue to receive contribution tax credits if your plan was established within the five-year window. Secure 2.0 tax credits apply to eligible employer-sponsored retirement plans such as 401(k) plans, DB/CB plans, SIMPLE IRAs and SEP IRAs. SOLO / Owner-only plans are eligible for the contribution credit and the automatic enrollment credit. SOLO / Owner-only plans are not eligible for the startup tax credit.
This calculator and information is intended solely as an educational guide and is not a substitute for professional tax or legal advice. Please consult your tax advisor or legal counsel for guidance on your particular situation.