In January 2019, the IRS issued final regulations interpreting Internal Revenue Code Section 199A, which was enacted by the Tax Cuts and Job Act of 2017 (TCJA). Specifically, Section 199A is the new 20% deduction for owners of small, pass-through businesses. The tax relief went into effect in 2018 and is scheduled to expire in 2026, unless Congress decides to change the expiration date. The 199A deduction formula is incredibly tricky and complex, making the services of a knowledgeable CPA almost unavoidable. We break down some of the basics for you here and show you how Section 199A presents an opportunity for Protective’s ICUL.

Two key points:

First, the final regulations confirm that full-time “insurance brokers” and “insurance agents” are eligible for the full relief of Section 199A. These groups were excluded from the total phase-out of the 199A deduction that applies to doctors, lawyers and other “specified service trade or business” owners with income greater than $415,000 (filing married) or $207,500 (all others). This update is especially newsworthy since there was uncertainty and worry throughout the insurance advisor and brokerage communities. (Other phase-out rules and limits may apply, however.)

Second, Section 199A, when combined with the TCJA’s reduction in the top tax rate, can reduce a business owner’s top tax bracket by 10% from prior years – from 39.6% to 29.6%. Sounds good, right? And there’s more. Business owners also can enjoy the 199A deduction in addition to the standard deduction, which doubled from $12,000 last year to $24,000 for married couples. That’s potential “new money” agents and brokers can use to gain the attention and loyalty of new business owners!


Billy, age 65, is a married, independent insurance agent. Let’s assume his spouse has no income. Billy reports $250,000 in commissionable net income (Adjusted Gross Income) from the business, after subtracting his ordinary business expenses. The new $24,000 standard deduction reduces his adjusted taxable income to $226,000. By utilizing 199A, Billy can now take a “below-the-line” deduction of $50,000 (20% of qualified business income at $250,000), further reducing his taxable income to $176,000. All in, the tax relief is the additional standard deduction compared to prior years ($12,000), plus the $50,000 199A deduction, or $62,000, in new deductions. At a 24% tax bracket, Billy pays $14,880 less than last year. (24% X $62,000).

Please note: This is a very simplified estimate, because the CPA will address numerous other features of the latest income tax rules after enactment of the Tax Cuts and Jobs Act of 2017, including other phase-outs and limits under section 199A and on itemized deductions.

The IUL Opportunity:

Section 199A opens new doors for fresh conversations with brokers, agents, financial advisors, banks, independent broker dealers and other centers of influence. The “new money” opportunity can lead to a wide range of solutions — all funded with insurance — for the owner’s personal and/or business needs.

On the business side, Protective’s IUL can provide an exceptional value across the range of business concepts: key person protection, business continuation and employee benefits. The business owner, of course, may also consider our IUL for numerous personal planning solutions — from legacy planning, lifetime wealth transfer, asset maximization, portfolio stabilization and more.

For questions or comments, feel free to contact Protective’s Advanced Sales Team, Dick Kait, JD, LLM (Taxation), CLU, ChFC, 2nd VP Advanced Sales, by email at or by phone at (513) 362-1537.

Let’s deliver on our promises. Together.

For Professional Use Only. Not for Use With Customers.
The tax treatment of life insurance is subject to change. Neither Protective Life nor its representatives offer legal or tax advice. Purchasers should consult their legal or tax advisor regarding their individual situations before making any tax-related decisions.
Protective Indexed Choice UL (UL-23) is a flexible premium universal life insurance policy issued by Protective Life Insurance Company, Birmingham, AL. Policy form numbers, product features and availability may vary by state. Consult policies for benefits, riders, limitations and exclusions. Subject to underwriting. Up to a two-year contestable and suicide period. Benefits adjusted for misstatements of age or sex. In Montana, unisex rates apply.
Protective Indexed Choice is not a security investment and is not an investment in the market. Clients should be provided with costs and complete details about the terms, conditions, limitations, or exclusions that apply to this policy.
All payments and guaranteed are subject to the claims-paying ability of Protective Life Insurance Company. Protective is a registered trademark and Indexed Choice is a trademark of Protective Life Insurance Company.

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