IRS Likely to Favor Insurance Agents over Wealth Planners and Retirement Advisors
The new 20% deduction the IRS is planning to offer to pass-through entities is likely to favor insurance agents over wealth planners and retirement advisors, ThinkAdvisor writes.
While the details are still unclear, the IRS is considering amending the qualified business income deduction provision of the new Tax Cuts and Jobs Act, according to the publication.
The new proposal would create a “complicated” deduction for owners or part owners in sole proprietorships, partnerships, S corporations, limited liability corporations and limited liability partnerships, ThinkAdvisor writes. And the rules are “much tougher” for owners of “specified service, trade or business” companies, as the deductions begin to phase out as incomes rise and disappear altogether past a certain threshold, according to the publication.
An SSTB firm is defined in the tax law as one “which involves the performance of services that consist of investing and investment management, trading, or dealing in securities … partnership interests, or commodities,” ThinkAdvisor writes, citing the draft. This would apply to professionals providing financial services including “financial advisors, investment bankers, wealth planners,and retirement advisors and other similar professionals, but does not include taking deposits or making loans,” according to the draft cited by the regulation.
But the SSTB income deduction limits in the new proposal would not apply to people involved in insurance, according to ThinkAdvisor.
Financial advisors are already losing out as a result of the new tax code, Frank Paré writes in ThinkAdvisor. The new law no longer lets investors deduct advice fees, for example, he writes.
In addition, the current law already limits small business owners’ ability to take advantage of deductions for pass-through entities because it places an income threshold from which other professionals, such as architects and engineers, are exempt, according to Paré.