justanotheradmin Posted February 22, 2024 Posted February 22, 2024 Did anyone else see this?! Maybe I'm late to the party! https://www.irs.gov/instructions/i8881 The way the $1,000 cap and yearly phase out is being applied is different than I understood. In a good way! For a small employer(less than 50), if its year 5, and they have given everyone (let's say there are 50) who would be credit eligible individual employer contributions of $4,000, say $200,000 total, then the credit would be $50,000, with the remainder as a deduction for $150,000. That's awesome! My prior (incorrect) understanding was that the $1,000 cap was applied first, before any phase downs / phase outs. Sounds like that is not the case! I would have though for my example only $12,500 would be the credit. The way I am reading the instructions it would be the $50,000. Anyone else agree? disagree? I'm a stranger on the internet. Nothing I write is tax or legal advice. I'd like a witty saying here, but I don't have any. When in doubt, what does the plan document say?
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