Earn credit for starting retirement plan

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in Small Business Tax

Q: I operate a small relocation company with 10 full-time employees and a few part-timers. We don't have a retirement plan. I remember reading something recently about a tax break for setting up a plan. Is there such a break? E.R.M., Chicago, Ill.

A: Yes. It's not big, but every bit helps. Here's the deal: As of 2002, qualified small businesses (less than 100 employees) can claim a tax credit for their retirement plan startup costs, including administrative expenses and retirement education. The credit is limited to $500 (50 percent of the first $1,000 in costs) incurred in the first year of the new plan, plus the two following years. Note: This credit is subject to the limits and carryover rules of the general business credit.

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