A key component of the Tax Cuts and Jobs Act of 2017 (TCJA) was the lowering of business tax rates. This was done in two ways:

  1. C-corporations have a simple rate reduction.
  2. Pass-throughs (S-corporations, partnerships, LLCs, sole proprietorships, estates and trusts) have a more complicated deduction program.

The key to profitable business planning

Since C-corporation dollars are more favorably taxed than individual dollars, it’s more ideal to use business dollars to pay life and annuity premiums.

Before-tax dollars that must be earned to achieve an after-tax $100,000 premium

At a flat business tax rate

At individual tax rates

21%

$126,582

37%

$158,730

35%

$153,846

32%

$147,059

24%

$131,579

The 2017 TCJA eliminated the corporate alternative minimum tax (AMT). Prior to the 2017 TCJA, many C-corporations were unwilling to purchase corporate-owned life insurance because of the adverse AMT consequences at the death of the insured.

Case studies to start a conversation

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