Taxes and Insurance Agencies -- Part II

 

 

By Bill Schoeffler, CIC and Catherine Oak, CIC, CRM

 

 

Last month our newsletter covered some tax strategies that insurance agency owners should use this year.

 

From where we stand right now in 2010, it is clear that the current tax laws will change.  Many tax laws have sunset provisions that take effect at the end of 2010.  

If Congress does nothing, taxes will go up in 2011. 

If Congress takes any action, it most likely will be to increase taxes even further. 

How do the tax laws impact you?

• If you die after 2010, the estate taxes go up from 0% to 55% for any part of your estate over $1 million.




• The top federal marginal income tax rate goes from 36% to 39.6%.
  




• If you sell your business after 2010, your capital gains tax goes from 15% to 20%, plus an additional 3.8% from health care taxes.
  

These changes are just from the federal government.  Many states are proposing changes too!

This all means that you will have less money in your pocket next year. 

If you are close to retirement, consider selling some or all of your ownership this year.  With a minimum increase of 8.8% in capital gains, you would need to increase your agency value by 11.5% to net the same after tax dollars next year.  That is a tall order in this weak economy and with a soft market condition. 

Oak & Associates recommends that you contact a tax planning professional as soon as possible to go over your options.

Click here to download a complete list of expiring tax codes prepared by the staff of the Joint Committee on Taxation.

The organization Americans for Tax Reform has an excellent article that summarizes the major tax changes that expire at the end of the year.  Click here to read their article on the the tax changes that take effect January 1, 2011.