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:
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 |
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At a flat business tax rate |
At individual tax rates |
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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.
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Key Person Coverage
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