PIA supports making permanent tax deductions currently available to some independent insurance agencies organized as passthrough entities.
The 2017 tax reform law (P.L. 115-141) established a deduction of up to 20 percent for small business owners organized as S corporations, including many independent insurance agencies. Following its passage, PIA played a key role in confirming that qualifying insurance agencies were eligible for the available deductions for passthrough entities. The provision offered much-needed tax relief for qualifying owners of independent insurance agencies organized as passthrough corporations by enabling them to claim up to a 20 percent tax deduction.
Historically, passthroughs are taxed through their owners and do not qualify for corporate income tax benefits; their owners pay taxes on the business as though the business income is personal income. The passthrough deduction allows owners of qualified businesses to exclude up to 20 percent of their passthrough business income from federal income tax. The deduction is subject to several complex requirements, including the presence of “qualified business income,” a specific amount of qualified taxable income relative to the applicable threshold for each taxable year, and the business owner’s intent to file individually or jointly.
Unlike the C-corporation tax cuts also included in the 2017 package, which are permanent, the passthrough deduction is temporary. PIA members with qualified passthroughs will lose the deduction once it sunsets on December 31, 2025, unless Congress acts to make it permanent. PIA is continuing to ask Congress to provide some measure of economic stability to eligible independent agencies by making permanent this important tax relief provision.
Make Tax Relief for Passthroughs Permanent
The tax deduction for passthrough entities has eased some of the pressure associated with running a small business, particularly over the last three years, and it has allowed eligible insurance agency owners to invest in their agencies, improve their businesses, and provide for their families.
For these reasons, PIA has been working to make the tax deduction permanent. We strongly support the Main Street Tax Certainty Act [not yet introduced in the 118th Congress; sponsored in the 117th Congress by Representatives Jason Smith (R-MO) and Henry Cuellar (D-TX), and Senator Steve Daines (R-MT)], which would make the 20 percent passthrough deduction permanent.
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