These are exciting times because for the first time in years there are tax breaks that a professional can get that they didn’t have available before. The unintended consequences of the recent tax act gave opportunity to the professional person that fits in the category if they wanted to be incorporated like a regular corporation. In the past they had to in the past become a PC. The significance was that from the very first dollar they were taxed at the highest corporate rate. So many professionals in business either chose to be taxed as a Sub S Corporation LLC partnership or sole proprietorship. Now for the first time in years the top corporate bracket was brought down to 21%. There are other tax breaks as well if one does not change their taxation, but those have their limits as well. Like all planning it may not be best to be all or none but rather use parts of the ideas.
Some of these professionals might also have spouses who are also professionals and some of these people also own real estate.
Where is the opportunity? It is being able to get in the door and talk about proactive tax planning that creates more spendable dollars. Those dollars could be used to afford more of our products and services and can convert higher taxed dollars to lower tax dollars and potentially TAX free dollars to the owner or key employee themselves.
For Federal Tax Brackets before the professional that was making money (if they don’t not make much money this is not for them), to pay $100,000 of premium in the past they could have paid $135,000-$150,000. If it inside a PC or C Corporation for Federal they would have to only raise $121,000.
In the past when we had professional clients many of us indicated that it would be best not to deduct certain individual coverages such as life insurance, disability income, LTC, or other personal coverages because of the disastrous tax consequences on the benefits. So if you had a pocket of less taxed dollars because you did some proactive tax planning versus their current bracket.
Proactive Planning in This market could result in more planning and income opportunities on a win-win basis with the client. For a brief video on just one of these benefits Demand and Split dollar please see attached