Eligible employers may be able to claim a tax credit of up to $5,000, for three years, for the ordinary and necessary costs of starting a SEP, SIMPLE IRA, or qualified plan (like a 401(k) plan.) A tax credit reduces the amount of taxes you may owe on a dollar-for-dollar basis.
If you qualify, you may claim the credit using Form 8881 PDF, Credit for Small Employer Pension Plan Startup Costs.
The credit is 50% of your eligible startup costs, up to the greater of:
You can claim the credit for each of the first three years of the plan and may choose to start claiming the credit in the tax year
before the tax year in which the plan becomes effective.
You can’t both deduct the startup costs and claim the credit for the same expenses. You aren’t required to claim the allowable credit.
An eligible employer that adds an auto-enrollment feature to their plan can claim a tax credit of $500 per year for a three-year taxable period beginning with the first taxable year the employer includes the auto-enrollment feature.