The provisions in this major legislation will greatly help insurance agencies to limit their federal tax liabilities, freeing up capital for them to invest in staff and technologies to drive efficiency and improve client service. Agency professionals should consult with tax professionals to take full advantage of these new benefits in the tax code. •
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The law also locked-in the temporary changes to individual federal income tax rates set by the 2017 law. Five of the seven marginal tax rates were set to increase at the end of the year. The new law makes the lower rates, which range from 10 % to 37 % depending on tax bracket, permanent and indexed to the inflation rate. This greatly helps those insurance agencies that pay tax at the individual rate.
The capital gains tax rate was left unchanged at 20 % on the sale of assets held for at least one year. However, the new law adjusted the applicable tax brackets. The law also raised the small business estate tax exemption to $ 15 million for individuals and $ 30 million for couples filing jointly. This exemption has been made permanent. A married couple can leave an agency to their heirs with the first $ 30 million in value tax-free.
Also made permanent were the higher standard deductions for individual taxpayers. The 2017 law temporarily doubled the standard deduction. This
may make little difference to agencies that want to take advantage of the enhanced asset depreciation deductions. Deducting depreciation expense by definition requires the business to itemize its deductions rather than take the standard deduction.
One provision of interest to the insurance industry was left out of the final version of the law – a tax on proceeds from third-party litigation financing( TPLF.) TPLF has been blamed for increased litigation costs from meritless lawsuits and higher jury awards. These are factors in increasing liability insurance premiums and reducing coverage availability. The IIABA described this omission as disappointing.
The provisions in this major legislation will greatly help insurance agencies to limit their federal tax liabilities, freeing up capital for them to invest in staff and technologies to drive efficiency and improve client service. Agency professionals should consult with tax professionals to take full advantage of these new benefits in the tax code. •
Push the Limits of Innovation Faster. a collective partnership of +
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