What tax credits are available for setting up a new retirement plan?
Plan-related expenses are typically tax deductible to your company, but half may qualify as tax credits instead (subject to certain limitations). There are five steps for calculating available credits:
- Determine how many NHCEs are eligible for your plan
- Multiply that number by $250
- The result from step #2 is your maximum tax credit for the year, subject to an overall cap of $5,000
- Determine your actual eligible plan expenses for the year
- Multiply that number by 50%
The result step #5 is your tax credit for the year, subject to a minimum credit of $500 and a maximum credit equal to the result from step #3. Phew.
You could break down the five steps to calculate your eligible credits, or you can download DWC's free tax credit calculator and take the messy math out of the equation.
