One of the most rewarding aspects of setting up a retirement plan for your small business is the tax benefits you can receive now while planning for the retirement years ahead of you.
One of the most popular oppositions to starting a retirement plan is the cost involved in making contributions. Did you know that employers receive a tax deduction for contributions that they make for either their employees are themselves? Different types of retirement plans have different taxes benefits.
If that isn’t encouragement enough, even quite a few CPA’s often recommend making contributions to employer-sponsored retirement plans as a means of reducing taxable income as well as reduce the amount of income taxes due when you utilize extensions.
As an incentive for small business to offer employer-sponsored retirement plans, the IRS even offers a tax credit just for the creation of a retirement plan. In some cases, when a business owner starts a retirement plan they may be eligible for a tax credit of up to 50% of the start up costs associated with the retirement plan up to $500 a year.
This benefit can be claimed for up to three years and covers costs associated with set up and administration of the plan as well as the employee education that is necessary to start the plan.
Not only are there tax benefits to the employer, employee contributions made through payroll deductions in most cases are tax-free and any accumulated interest in the account grows tax free until the point of withdrawal.
