Tax Advantages Aren’t Just for Employees

Retirement plans are commonly associated with providing a tax-deferred savings vehicle for employees to save for retirement. But lesser-known tax benefits are those that employers can reap. Did you know that if your retirement plan offers an employer contribution (such as a match or profit-sharing allocation), those employer contributions are deductible on the employer’s federal income tax return to the extent that the contributions do not exceed the limitations specified in the Internal Revenue Code (up to $285,000 in 2020)? And if your business doesn’t already offer a retirement plan, the IRS incentivizes employers to establish a new plan (401(k), 403(b), SEP, and SIMPLE plans all qualify) with a 50 percent credit on start-up costs for up to the three first years (up to $500 per year). So, if you’ve been thinking about starting a retirement plan for your business but have yet to do so, now is the time to leverage every tax advantage the IRS has to offer.