National Association of Insurance and Financial Advisors

IRS Proposal Clarifies Pass-Through Income Taxation, Provides Tax Benefit for Insurance Agents

The federal tax-reform law passed late last year left lingering questions about how the law affects taxpayers with income from “pass-through” businesses. A regulation proposed earlier this week by the Treasury Department clarifies the situation.
The rule and the tax code are very complex, and NAIFA members should seek counsel from tax professionals to determine how the pass-through regulation would apply to them. In general, however, the rule allows taxpayers to deduct up to 20 percent of their qualified business income (QBI) if their taxable income is under $315,000 for joint filers or $157,000 for individual filers.
The rule allows those with incomes above those restrictions to claim the deduction if their QBI results from certain types of businesses, including insurance agents and brokers. The rule, however, restricts investment-advice and -management businesses, including retirement planning, from deducting income from those operations if that income exceeds the thresholds and is 10 percent or more of their gross revenue.
“This is a big win for NAIFA,” said Kevin Mayeux, NAIFA's CEO. “NAIFA worked closely with officials at the Treasury Department to carve out the exemption for insurance agents and brokers. This goes hand-in-glove with our work with the administration and Congress to ensure tax reform made no changes to the taxation of life insurance and annuity products, protecting advisors and their clients from proposals that could have threatened Americans’ financial security.”    
NAIFA members may read an overview of IRS 199A, the proposed pass-through business regulation, in the most recent NAIFA GovUpdate. An IRS FAQ on the regulation is also available.
  • Posted August 10, 2018 IN

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