The SECURE Act 2.0 was signed into law in December 2022. It created the most generous retirement plan tax credits the federal government has ever offered small businesses.
Three years later, most business owners still don't know the details. According to the National Association of Plan Advisors, 82% of small business owners without a retirement plan are unaware these SECURE Act 2.0 tax credits for small business even exist.
Legislative tax content gets outdated fast. Here's the current state of these credits as of 2026 — exact amounts, who qualifies, what most people get wrong, and the deadlines that actually matter.
The Three Credits at a Glance
| Credit | Amount | Duration | Max Total |
|---|---|---|---|
| Startup Cost Credit | Up to $5,000/year | 3 years | $15,000 |
| Employer Contribution Credit | Up to $1,000/employee/year | 5 years | Scales with headcount |
| Auto-Enrollment Credit | $500/year | 3 years | $1,500 |
These are tax credits, not deductions. That means they reduce your tax bill dollar for dollar. A $5,000 credit saves you $5,000 in taxes. Period.
Credit 1: Startup Cost Credit (Section 45E)
This covers the cost of setting up and running a new retirement plan — administration, recordkeeping, and employee education expenses.
If you have 50 or fewer employees: The credit covers 100% of your qualified startup costs. That's the full amount, not half. SECURE 2.0 doubled the original rate from 50% to 100% for businesses in this range.
The cap: The greater of $500, or $250 per eligible non-highly-compensated employee, up to $5,000 per year. So if you have 20+ eligible employees, you hit the $5,000 maximum.
Duration: Three tax years. That's the year you establish the plan plus the following two years.
Companies with 51–100 employees still qualify, but at the original 50% rate.
Credit 2: Employer Contribution Credit
This is the credit most business owners don't know about — and it's the most valuable for companies with more than a handful of employees.
If you make employer contributions to the plan (matching or non-elective), the government gives you a tax credit equal to your actual contribution, up to $1,000 per employee per year. Only employees earning under $100,000 (indexed for inflation) qualify.
The credit phases down over five years:
| Plan Year | Credit Rate (1–50 employees) | Credit Rate (51–100 employees) |
|---|---|---|
| Year 1 | 100% | Reduced by 2% per employee over 50 |
| Year 2 | 100% | Same formula |
| Year 3 | 75% | Same formula |
| Year 4 | 50% | Same formula |
| Year 5 | 25% | Same formula |
For a 30-person company where each eligible employee gets a $1,000 contribution: that's $30,000 in credits in Year 1, $30,000 in Year 2, $22,500 in Year 3, $15,000 in Year 4, and $7,500 in Year 5. Total: $105,000 over five years.
This credit did not exist before SECURE 2.0. It's entirely new.
Credit 3: Auto-Enrollment Credit
The simplest one. Include automatic enrollment in your plan and you get $500 per year for three years. $1,500 total.
Two things worth noting:
- This applies to new plans and existing plans that add auto-enrollment for the first time
- As of January 2025, all new 401(k) plans established after December 29, 2022 are required to include auto-enrollment anyway (with exemptions for businesses under 10 employees or in existence less than 3 years). So you might as well claim the credit for doing what's now mandatory.
Who Qualifies
The SECURE Act 2.0 tax credits for small business have specific eligibility rules. Here's the checklist:
- Employee count: No more than 100 employees who received at least $5,000 in compensation during the preceding tax year. Full credits for 50 or fewer. Reduced rates for 51–100.
- New plan requirement (startup credit): You must not have maintained an eligible plan during the three years before the first credit year. This is for new plans, not existing ones.
- At least one non-highly-compensated employee must be eligible to participate.
- Eligible plan types: 401(k), SEP IRA, SIMPLE IRA, and other qualified plans.
The key detail most people miss: The employer contribution credit does NOT apply to employers who maintained a qualified plan during the 3 years before the first credit year. This means it's specifically designed for businesses starting a plan for the first time. If you've been putting this off, the incentive to act is at its highest right now.
The Deadlines That Actually Matter
There's no expiration date printed on these credits — they're part of the tax code now. But the math creates its own deadline.
The startup cost credit runs for three years starting from the year you establish the plan. Every year you wait is a year of credits you don't get back. If you start a plan in 2026, your credits run 2026–2028. Start in 2027, they run 2027–2029. The total stays the same, but the money arrives later.
More practically: if you're growing past 50 employees, the full startup credit phases down once you cross that threshold. A company at 45 employees today that hits 55 next year drops from 100% to 50% on the startup credit. The window to capture the full SECURE Act 2.0 tax credits for small business owners at your current size is now.
What Most Business Owners Get Wrong
"My business is too small." Any size business can offer a 401(k). There is no minimum employee count. Solo 401(k) plans exist for owner-only businesses.
"I have to match." Employer matching is completely optional. You can offer a 401(k) with zero employer contributions. But if you do contribute, the employer contribution credit gives you most of that money back.
"It's too expensive." Plans start as low as $95/month. The startup cost credit can cover 100% of those costs for three years. For many small businesses, the plan is effectively free.
According to Fidelity, 48% of small business owners say they can't afford a retirement plan. According to ShareBuilder, 55–58% think their business is too small to qualify. Both are wrong.
What to Do With This Information
The SECURE Act 2.0 tax credits for small business are the most aggressive incentive the government has ever created for retirement plan adoption. Whether you're a 15-person company or a 90-person company, the math works in your favor — especially in the first two years.
The starting point is understanding how these credits apply to your specific headcount and contribution structure. The numbers are different for every company.
Get the Full Tax Credit Breakdown for Your Company Size
I put together a free guide that walks through every credit, who qualifies, and exactly how the math works for companies with 10, 25, and 50 employees. Five pages. No jargon.
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