401(k) Tax Credits in 2026: A Powerful Opportunity for Business Owners

What Changed Under SECURE 2.0?

SECURE 2.0 expanded the retirement plan tax credits first introduced under the SECURE Act. The intent is simple: make plans more affordable for small and midsized employers — and reward employers that help employees save.

For eligible employers starting a new retirement plan in 2026, up to three tax credits may be available.

1. Startup Cost Tax Credit Explained (Up to $5,000 per Year)

Businesses with 100 or fewer employees may be eligible for a startup credit for plan setup and administrative costs.

Here’s how it works:

• Up to 100% of eligible startup costs (1–50 employees) — and generally 50% for 51–100 employees

• Maximum of $5,000 per year
• Available for the first three years of the plan
• Applies to 401(k), profit sharing, SEP, and SIMPLE plans

Eligible expenses generally include setup, administration, and employee education. In many cases, this credit can significantly reduce — or even eliminate — the cost to launch the plan.

For many businesses, retirement plans can also play an important role in broader business financial planning strategies.

2. Employer Contribution Tax Credit Breakdown (Up to $1,000 per Employee)

This is where SECURE 2.0 has the biggest impact.

If the employer makes contributions (match or profit sharing), an additional employer contribution tax credit may apply:

• Up to $1,000 per eligible employee
• Available for the first five years
• Credit percentage phases down over time

• Applies only to employees earning up to the indexed $100,000 compensation limit (in general)

For businesses with 50 or fewer employees, the credit percentage starts at 100% and then phases down over five years (generally 100%, 100%, 75%, 50%, 25%) — up to $1,000 per eligible employee each year. Employers with 51–100 employees may still qualify, but the credit is typically reduced.

3. Automatic Enrollment Tax Credit Benefits ($500 per Year)

Plans that include automatic enrollment may qualify for an additional $500 tax credit:

• Available for the first three years
• Applies when an eligible automatic contribution arrangement is added
• Stackable with other retirement plan tax credits

Beyond the tax benefit, automatic enrollment often increases participation and can help plans pass compliance testing — a win-win for both outcomes and administration.

Strong retirement benefits can also support long-term employee retention strategies for growing businesses

How SECURE 2.0 Tax Credits Stack Together

With the right structure, these incentives can stack:

• Startup cost credit offsets plan setup and administration
• Contribution credit rewards employer contributions
• Automatic enrollment credit adds supplemental savings

In many cases, the combined value can exceed $10,000–$15,000 in early-year credits — before factoring in the tax deduction for contributions.

Important 401(k) Tax Credit Planning Considerations (Where CPAs and Advisors Add Value)

A few key points worth emphasizing:

Note: Several items referenced above (such as the employee compensation threshold and certain credit calculations) are indexed or updated over time. Confirm the applicable 2026 limits and rules when implementing and filing.

• Credits are claimed on IRS Form 8881
• You cannot deduct expenses used to calculate a credit
• Eligibility depends on employee count and prior plan history
• Controlled‑group rules apply

• Owner-only plans usually won’t qualify because the credits generally require at least one non-highly compensated employee (NHCE) to benefit

This is where collaboration between CPAs and retirement plan advisors becomes crucial. The ideal plan design from day one helps ensure credits aren’t lost or inadvertently disqualified.

The Bottom Line on SECURE 2.0 Tax Credits

Thanks to SECURE 2.0, starting a retirement plan in 2026 isn’t just a benefits decision — it’s a tax strategy.

When structured correctly, a new 401(k) can:

• Reduce current tax liability
• Help owners save aggressively
• Improve employee retention
• Pay for a meaningful portion of its own cost

If you’re a business owner considering a plan now is a great time to revisit plan design with fresh eyes.

Cetera Wealth Services, LLC exclusively provides investment products and services through its representatives. Although Cetera does not provide legal advice, or supervise legal services, Cetera representatives may offer these services through their independent outside business. This information is not intended as legal advice.

The opinions are those of the writer, and not the recommendations or responsibility of Cetera Wealth Services, LLC or its representatives. This information is from sources believed to be reliable, but Cetera Wealth Services, LLC cannot guarantee or represent that it is accurate or complete.