· Kyle Milner, CPA · Tax Planning · 3 min read
2025 Retirement Plan Moves That Cut Taxes Now
Five retirement plan strategies you can still act on before year-end-credits worth up to $15k, auto-enrollment bonuses, and even Roth conversion math.
The clock does not stop. Every day, retirement creeps a little closer. There’s still time to make 2025 count-here are five moves to consider before December 31.
1. Establish your 2025 retirement plan
Ask yourself a simple question: Do you have this year’s retirement plan in place? If not, and you have cash to contribute, put the plan in place so you can claim the deduction for 2025. Owner-employees can often make both employee and employer contributions (think solo 401(k), SEP, or SIMPLE), which lets you shelter more than you expect.
2. Claim the enhanced retirement plan start-up credit (up to $15,000)
When you create a new qualified plan, the SECURE Act gives you a non-refundable credit based on “qualified start-up costs”-essentially the expenses of creating/administering the plan plus employee education. The credit is the greater of $500 or the lesser of:
- $250 × the number of non-highly compensated employees eligible to participate, or
- $5,000.
Spreading that credit over the first three years can cover a big chunk of your start-up costs.
3. Stack the small-employer pension contribution credit (up to $3,500 per employee)
SECURE 2.0 added a separate credit for employer contributions-up to $1,000 per employee in the first year. The full amount is available for years one and two, then phases down (75%, 50%, 25%) before disappearing in year six. Employers with 51–100 workers phase out 2% per employee; over 100 employees, the credit is zero. High earners (2025 wages over $105,000) don’t qualify for this credit.
Example. Contribute $1,000 for each of 30 employees in year one and you earn a $30,000 credit. That’s on top of the start-up credit above.
4. Use the auto-enrollment credit ($500 per year for three years)
Add an automatic contribution arrangement to your 401(k) or SIMPLE IRA and you can claim a $500 credit for up to three years. SECURE 2.0 will soon require most brand-new 401(k)/403(b) plans to include auto-enrollment anyway, but the credit also applies to existing plans that add the feature. No out-of-pocket cost is necessary-adding the provision triggers the credit.
5. Consider a Roth conversion
Traditional IRAs and 401(k)s trigger taxable withdrawals in retirement. Converting to a Roth IRA creates an upfront tax hit, but then: contributions and conversions can be withdrawn tax-free (subject to the five-year rule), qualified earnings are tax-free, and there are no required minimum distributions during your lifetime. With statutory tax rates scheduled to rise in 2026, running the math on a partial conversion in 2025 can make sense.
Action tip: Calculate the tax bill before converting so you know the cash you’ll need to cover it. Roth conversions work best when you can pay the tax with funds outside the retirement account.
Ready to map out which credit or conversion applies to you?
