Tax credits

SECURE 2.0 tax credit calculator

Estimate the federal tax credits your business may be able to claim in the first five years of a new 401(k), SIMPLE IRA or SEP IRA. It takes about a minute, and nothing you enter leaves your browser.

Plan type Employees who earned at least $5,000 last yearInclude everyone on payroll, owners too. The credits apply to businesses with 100 or fewer. Of those, eligible for the plan and not highly compensatedGenerally excludes owners of more than 5% and employees earning above $160,000 in the prior year. Plan setup and administration costs per year ($)Fees the business pays to set up, run and educate employees about the plan. Ask your provider for an estimate. Employees who will receive an employer contributionCount only employees whose wages are at or below the annual limit ($105,000 for 2025, adjusted for inflation). Average employer contribution per employee per year ($)A match or profit sharing paid by the business. Employees' own salary deferrals don't count. The plan will automatically enroll employeesAdds $500 a year for three years (401(k) and SIMPLE IRA only).

Estimated federal credits, years 1 to 5

Hypothetical estimate based on your inputs. Not tax advice.

Year	Startup	Contributions	Auto-enroll	Total
Total

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The initial plan review is complimentary. We'll help you design a plan that can qualify, and your CPA can confirm the credits.

How the estimate works

Startup cost credit (years 1 to 3): 100% of eligible setup and administration costs for employers with 50 or fewer employees (50% for 51 to 100), up to the greater of $500 or $250 per eligible non-highly compensated employee, capped at $5,000 a year.
Employer contribution credit (years 1 to 5): up to $1,000 per eligible employee of what the business contributes: 100% in years 1 and 2, 75% in year 3, 50% in year 4 and 25% in year 5. For employers with 51 to 100 employees, each percentage is reduced by 2 points for every employee over 50. Not available for defined benefit plans.
Automatic enrollment credit (years 1 to 3): $500 a year for a 401(k) or SIMPLE IRA with an eligible automatic enrollment feature.
Who qualifies: generally, employers with 100 or fewer employees who earned at least $5,000 in the prior year, at least one eligible non-highly compensated employee, and no similar plan for substantially the same employees in the prior three years.

Credits are claimed on IRS Form 8881, and you can't also deduct the costs covered by a credit. For a worked example, see what a small business retirement plan really costs after SECURE 2.0 credits.

Common questions

Which federal tax credits can a small business get for starting a retirement plan?

Under SECURE 2.0, eligible employers with up to 100 employees may claim a startup cost credit for up to three years, an employer contribution credit of up to $1,000 per eligible employee for up to five years, and a $500 a year credit for three years when the plan adds automatic enrollment.

Do SEP IRAs and SIMPLE IRAs qualify for the credits?

Yes. SEP IRAs, SIMPLE IRAs and 401(k) plans can qualify for the startup cost and employer contribution credits. The automatic enrollment credit applies to 401(k) plans and SIMPLE IRAs.

Do employee salary deferrals count toward the employer contribution credit?

No. Only employer contributions count, such as a match or profit sharing, and only for employees whose wages are at or below the annual limit ($105,000 for 2025, adjusted for inflation). Employees' own salary deferrals do not count.

Hypothetical illustration only, based on federal rules as of September 27, 2026, which can change. Actual credits depend on your business's facts, plan design, costs paid and tax situation, and are not guaranteed. Not individualized investment, tax or legal advice. Consult your tax adviser before relying on any credit.