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New Section 199A Makes Pass-Through Deductions Available for Small Business Owners and Life Insurance Professionals

The Internal Revenue Service (IRS) recently issued its final regulations describing the rules pertaining to section 199A. For those who are unfamiliar with 199A, the section provides for a new deduction of up to 20 percent of qualified domestic business income for pass through entities such as sole-proprietorships, partnerships, S-corporations, trusts, and estates. AALU provided this summary in its January 30, 2019 WR Newswire:

"By way of background refresher on section 199A, in relevant part the provision allows a business owner or independent contractor . . . to take up to a 20 percent deduction for such owner's or contractor's net qualified business income.  If a business is not a qualified trade or business, an owner or independent contractor cannot take any deduction."

Windsor is pleased that the regulations favorably treat commission-based life insurance sales income, and may provide meaningful tax savings related to the deduction for business owners or independent contractors principally engaged in life insurance sales.

As a result, section 199A provides a triple opportunity for life insurance professionals: First, increased net income for you; second, increased income for clients and prospects whose businesses qualify for the new 20% deduction; third, other taxpayers, including high-income earners - especially professionals who can't take advantage of the new deduction - might find the tax deferral features of permanent life insurance even more attractive today.

As with all opportunities having to do with taxes, IRC Section 199A may be a 'limited time offer.'  We recommend that you contact your small business owner clients and prospects during this tax season, while the impact of 199A and the advantages of life insurance are center stage.  And as always, you can depend on Windsor for innovative case design, insightful product selection, underwriting expertise and extraordinary service.

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Monday, 29 May 2023
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