Tax Reform Tuesday: The Benefits of Funding Retirement Plan Contributions by the 2017 Tax Return Due Date

Written on March 6, 2018

It is more important than ever for businesses to fund retirement plan contributions by the due date of the 2017 tax return. This will allow a deduction on the 2017 tax return for payments made in 2018. This is advice we have routinely provided to our clients in past years, but the declining tax rates magnify the benefit of this technique.

If funded before the 2017 tax due date, for a C corporation in the 34% tax bracket, the after-federal-tax cost of a $1,000,000 retirement plan contribution will be $660,000. Under the new tax law, that same $1,000,000 contribution will now cost $790,000. This technique is so beneficial that it has gained the attention of Wall Street, and some large companies are issuing bonds to fund the contribution.

If you have questions about how tax reform will impact you or your business, please contact your Warren Averett Advisor.