Sponsored & Programmed by Capital Group at CNBC Small Business Playbook

With the Secure 2.0 Act recently passed, small businesses have more incentives to set up retirement plans. Many small businesses feel intimidated by offering plans despite the substantial savings provided by this legislation. With insights from a recent survey of small business owners conducted by Capital Group, this session will provide information on how small businesses can overcome perceived obstacles to setting up a retirement plan. 

Renee Grimm, Capital Group SVP of Retirement Plans
Interviewer: JJ Ramberg, Financial Journalist…(read more)

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Some of the Retirement Plan Tax Credits You’ve Been Waiting for are Here

retirement planning is an essential aspect of our financial lives, and the government recognizes the importance of encouraging individuals to save for their golden years. To incentivize retirement savings, the government offers several tax credits that can help individuals reduce their tax burden and maximize their retirement savings. In this article, we’ll explore some of the retirement plan tax credits that you’ve been waiting for, and how they can benefit you.

1. Saver’s Credit:
The Saver’s Credit, also known as the Retirement Savings Contributions Credit, is designed to provide tax relief to low and moderate-income individuals who contribute to retirement accounts such as 401(k)s, IRAs, and similar plans. This credit is a valuable tool to encourage people with lower incomes to start saving for retirement.

The credit is based on your annual contributions to retirement accounts and can be claimed on your tax return. The amount of the credit varies depending on your income level and filing status, but it can be as much as 50% of your contributions, up to a maximum of $2,000 for individuals and $4,000 for couples.

2. Qualified Retirement Savings Contributions Credit:
The Qualified Retirement Savings Contributions Credit, also referred to as the Retirement Savings Contributions Credit, is another tax credit that can provide significant savings for eligible individuals. It allows taxpayers to directly offset their tax liability by up to 50% of their contributions to qualified retirement plans, such as traditional or Roth IRAs, employer-sponsored plans, and other similar accounts.

Similar to the Saver’s Credit, the eligibility for this credit is based on income and filing status. The credit is available for individuals with a modified adjusted gross income (MAGI) of up to $34,500 and joint filers with a MAGI of up to $69,000.

3. Small Employer Pension Plan Startup Credit:
For small business owners who want to establish a retirement plan for their employees, the Small Employer Pension Plan Startup Credit is a valuable incentive. This credit is designed to defray costs associated with setting up a qualified retirement plan, such as a 401(k) or a SIMPLE IRA.

The credit covers up to 50% of the qualified startup costs paid or incurred in the first three years, up to a maximum of $500 per year. To be eligible, the company must have 100 or fewer employees with at least one employee earning at least $5,000 in the preceding year.

4. Automatic Enrollment Credit:
The Automatic Enrollment Credit is aimed at encouraging employers to adopt automatic enrollment features in their retirement plans. Automatic enrollment allows eligible employees to be automatically enrolled in the retirement plan if they don’t make an affirmative choice to opt-out. This feature helps increase retirement plan participation rates, benefiting both employers and employees.

Employers can receive a tax credit of up to $500 per year for the first three years to offset costs related to implementing an automatic enrollment feature. To qualify, employers must have 100 or fewer employees with at least one employee earning at least $5,000 in the preceding year.

In conclusion, the government offers various retirement plan tax credits to encourage individuals to save for retirement. These credits provide valuable incentives and can significantly reduce your tax liability while maximizing your retirement savings. Whether you’re a low-income earner, a small business owner, or an employer looking to implement automatic enrollment, these tax credits are here to support your retirement planning journey. Make sure to consult a tax professional to determine your eligibility and take advantage of these beneficial tax credits.