New Tax Rule On Pass-Through Businesses To Benefit Agency Owners

By Staff Reports

The Trump Administration finalized an IRS regulation making clear that owners and shareholders of insurance agencies and brokerages organized as pass-through entities can fully benefit from a new tax deduction.

The move pleased the Independent Insurance Agents & Brokers of America.

“Today the IRS released a final regulation implementing a new section of the tax code to create a deduction for owners and shareholders of certain pass-through businesses, including insurance agencies and brokerages,” said Bob Rusbuldt, Big “I” president & CEO.

“This regulation is a major and hard-fought win for Big ‘I’ members—the vast majority of which are organized as pass-through entities. Prior to the regulation being finalized there was uncertainty surrounding the application of the deduction to insurance businesses.”

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Under the regulation, owners and shareholders of insurance agencies and brokerages can take up to a 20 percent tax deduction on qualified business income, no matter their taxable income levels, because the IRS does not consider insurance agents and brokers to be engaged in a “specified service trade or business.”

Owners and shareholders of “specified service trades and businesses” cannot take advantage of the deduction if their taxable income is over a certain level.

“Big ‘I’ members, whether organized as a pass-through entity or a C-corporation, can now rest assured that the tax reform law is working for them and their employees,” said Charles Symington, Big “I” senior vice president of external, industry & government affairs. “We thank Congress for its previous work on this landmark tax law and the Administration for working to finalize this regulation as quickly as possible.”