Free 401(k)s for Small Business? Close! New IRS Tax Credits Cover Most Costs

By ShareBuilder 401k

You may have missed this one, but it’s big news for small businesses working to stay competitive in the labor market, save on taxes, and/or save for retirement!

If your company has 1-50 employees and you’ve never offered a 401(k) plan, tax credits can cover your costs dollar for dollar. The recent Secure Act 2.0 enables tax credits to cover up to $5,000 per year for the first three years of the plan for those small businesses starting their first 401(k) plan. This includes setup and ongoing administration costs.

Know that most 401(k) providers will not charge you anywhere near $5,000 per year for these services. A business of 10 people might pay $1,000 to $1,500 per year for reference. Also, if your business has 51-100 employees, half of your costs may be covered by tax credits.

Contribution Tax Credits and Tax Deductions Too
Plus, if you decide to provide an employer match, much of this amount can be covered by tax credits, and the rest is deductible for your business. See examples of how both the startup plan credits and the employer contribution credits work in this article.

Lastly, you will likely love the other tax benefits you’ll receive in your personal 401(k) accounts such as lowering taxes via tax deferred savings or saving taxes tomorrow with the Roth 401(k).

We don’t think there has ever been a more affordable time to start a 401(k) plan for your business.

Here are top tax reasons to start a 401(k) plan:

Reach out if you have questions. We’re happy to help.

This is not meant to be tax advice. Please consult with your professional tax advisor.

Meet the Author

Our low-cost 401k plans are easy to setup online and are supported by our 401k advisors and specialists. ShareBuilder 401k serves small business and medium-sized companies, as well as the self-employed. We offer Roth 401k, Safe Harbor 401k, Traditional 401k, and Solo 401k options. Your 401k plan is paired with investment management expertise and employee education to help you save more.