Independent agents and brokers may benefit from proposed tax regulations. (Photo: Shutterstock)
Independent insurance agents and brokers can celebrate a tax win for a change. Thanks in part to strong advocacy by many trade groups, including the National Association of Professional Insurance Agents (PIA), proposed regulations issued Aug. 8 by the U.S. Treasury and the Internal Revenue Service (IRS) specifically state that "insurance agents and brokers" are not excluded from taking the 20% pass-through tax deduction that was passed as part of the tax reform legislation signed into law late last year.
Many independent insurance agencies are organized as sole proprietorships, partnerships, or Subchapter S corporations and they don't pay corporate income tax. Instead, their income "passes through" the firm and appears directly on their owners' individual tax returns, where it is taxed as normal income. These individuals are likely to see lower tax bills with the 20% deduction, subject to other limitations imposed by law or regulation.
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Rosalie Donlon
Rosalie Donlon is the editor in chief of ALM's insurance and tax publications, including NU Property & Casualty magazine and NU PropertyCasualty360.com. You can contact her at [email protected].
