Every year, the calendar does the same thing: it marches forward… whether we’re ready or not. And with every tick of the clock, your retirement is one year closer. The good news? There’s still time before December 31 to make some powerful, tax-saving moves that boost your future retirement security.
Consider this your year-end checklist—five smart opportunities you can still seize while the clock is winding down.
- Establish Your 2025 Retirement Plan
Beat the Clock Tip: Don’t wait—plans need to be set up before year-end for 2025 deductions.
Here’s the big question: Do you already have your retirement plan in place—for yourself or for your corporation?
If not, and you’ve got some cash available to invest in your future, now is the moment to act. Putting a qualified retirement plan in place allows you to secure tax deductions for 2025.
The best part for many small business owners? When you participate in most defined contribution plans, like a 401(k), you wear two hats—employee and employer. That means you can make both contributions, letting you tuck away a much larger amount.
- Use the New and Improved Retirement Plan Start-Up Tax Credit (Up to $15,000)
Beat the Clock Tip: A new plan could mean substantial credits—don’t leave free money on the table.
When you establish a brand-new qualified retirement plan—like a 401(k), defined benefit pension plan, profit-sharing plan, SIMPLE IRA, or SEP—you may qualify for a non-refundable tax credit equal to the greater of:
- $500, or
- The lesser of:
- $250 × the number of your eligible non-highly compensated employees, or
- $5,000
Your credit is based on your “qualified start-up costs”—which include:
- Costs to establish or administer the plan
- Costs for retirement-related employee education
This credit can total up to $15,000 over three years. A nice reward for doing something that benefits both your employees and your future.
- Claim the New Small Employer Pension Contribution Credit (Up to $3,500 Per Employee)
Beat the Clock Tip: Helping employees save can also save you tax dollars.
Thanks to SECURE 2.0, employers can earn up to $1,000 per employee in credits for employer contributions to a retirement plan—starting in the year the plan is established.
The credit schedule works like this:
- 100% of contributions (up to $1,000 per employee) in Year 1
- 100% in Year 2
- 75% in Year 3
- 50% in Year 4
- 25% in Year 5
- 0% in Year 6 and beyond
Example: If you launch your plan this year and contribute $1,000 each to 30 employees, you receive a $30,000 tax credit.
A few limitations:
- Credit phases out if you have 51–100 employees (reduced 2% per employee).
- No credit if you have more than 100 employees.
- You earn no credit for employees earning over $105,000.
- This credit does not apply to contributions to defined benefit plans or employee deferrals under Section 402(g)(3).
Still, for many small employers, this credit is a major year-end win.
- Add Automatic Enrollment and Claim an Extra $500 Credit (Up to $1,500 Total)
Beat the Clock Tip: Add a feature, earn a credit—simple as that.
SECURE 2.0 introduced another credit: $500 per year for up to three years when you include an automatic enrollment feature in a qualified plan like a 401(k) or SIMPLE IRA.
The credit applies to new and existing plans. Even better? It doesn’t require you to spend anything. Just add the auto-enroll feature.
Starting in 2025, most new 401(k) and 403(b) plans must include automatic enrollment anyway, except for:
- SIMPLE 401(k)s
- Government plans
- Church plans
- Businesses under 3 years old
- Businesses with 10 or fewer employees
Adding auto-enrollment now can bring in $1,500 in easy credits.
- Think About a Roth Conversion Before Year-End
Beat the Clock Tip: Know the taxable impact before you convert.
A Roth conversion might be worth exploring as you look toward retirement and year-end tax planning. Before converting a 401(k) or traditional IRA, calculate how much tax you’ll owe—because you’ll need cash on hand to pay it.
Why consider a Roth conversion?
1.Withdraw contributions anytime, tax-free and penalty-free—you already paid taxes on the money going in.
2.Withdraw converted amounts tax-free anytime (though conversions withdrawn within 5 years face a 10% penalty).
3.Enjoy tax-free growth and tax-free qualified withdrawals after age 59½ (with a five-year Roth history).
4.Skip required minimum distributions (RMDs)—Roth IRAs don’t require withdrawals at age 73, giving your savings more time to grow.
A Roth can be a powerful long-term tool—but only when the tax impact fits your broader financial plan.
Final Thought: The Clock Is Ticking—But You Still Have Time
As December 31 approaches, you still have opportunities to save on taxes and strengthen your retirement plan. Whether it’s establishing a new plan, claiming valuable credits, adding automatic enrollment, or considering a Roth conversion, the window is open—but only for a short time.
For help determining which year-end moves make sense for your situation, contact Saunders Tax & Accounting at http://www.saunderstax.com or call us at 301-714-2071. Open Monday – Thursday 9 am to 5 pm. Awarded the Hagerstown Chamber of Commerce “2023 Small Business of the Year” and Hagerstown Hotlist 2024, we have been providing a Less Taxing Life and More Prosperous Solutions since 1984!
