Attention Small Business Owners: New Tax Credit available for Starting a Qualified Retirement Plan
If you are a small business owner and you have not yet started a qualified retirement plan (a 401(k) or pension plan) for the employees of your company, you may be curious to know about "Form 8881," which allows you to deduct 50% of the first $1,000.00 of qualified plan startup costs. You can take a maximum credit of $500.00 for each of the first 3 years of the plan.
The eligible qualified plans include pension plans, profit sharing plans, 401(k)'s, SEP's, and SIMPLE Plans. The plan must meet the following conditions:
1. A covered employee who is not a 5% or more owner of the company (or close relative)
2. A covered employee who does not earn $95,000 or more.