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The Tax Cuts and Jobs Act: What It Means for Advisors

Late last year, President Donald Trump signed into law a sweeping tax bill that cuts corporate, business and individual tax rates as well as eliminates many deductions.

The new law does not impose new taxes on life or health insurance, annuities, retirement savings, or employer-provided benefits. It creates a new deduction for qualified income from pass-through entities, which may benefit some advisors and/or their small-business clients. Some revisions are permanent, while others expire at some point in the future. The current funding of retirement savings is preserved.

When the tax-reform bill was being written and negotiated in Congress last year, NAIFA advocacy went into high gear. The association emphasized the fact that public policy must continue to encourage Americans to plan ahead, protect their families’ financial security and adequately save for retirement. Well-prepared families, the association pointed out, will have sufficient retirement savings accounts, life insurance, medical insurance and guaranteed income annuities to supplement their Social Security benefits.

Although measures were proposed that could have made it more difficult or more expensive for families to plan for their long-term financial needs, none of these are included in the final act, thanks to the efforts of NAIFA and its industry partners.

Some significant provisions that would have directly impacted agents, advisors and their clients were not included in the act. Here is a rundown of what was not included.


» Limits on pre-tax retirement funding in favor of after-tax “Rothification” funding were not included.


» There are no changes to how life insurance and annuity products are taxed.


» The bill does not limit the amount of pretax contributions to retirement plans or individual retirement accounts (IRAs).


» If you work with long-term care clients and prospects or those with large health expenditures, the bill does not repeal the medical expense deduction, and it lowers the threshold for two years from 10 percent of adjusted gross income (AGI) to 7.5 percent of AGI.


» If you help employers who offer workplace benefits, the bill does not limit the tax treatment of employer-sponsored benefits.


» If you offer other employee benefits, the bill does not change current tax rules for nonqualified deferred compensation or company-owned life insurance (COLI).


» If you advise high-net-worth individuals, the estate tax is not repealed (although the exemption amount is doubled), charitable donations deductions are unchanged and the top individual rate is lowered from 39.6 percent to 37 percent.


» If you offer securities, the bill does not include the first-in, first-out (FIFO rule) proposed change.


» If you offer casualty insurance products, the final bill limitations are different from current law but preserve deductions for losses if a disaster is declared by the president.


Other adverse tax proposals that NAIFA has successfully stymied — often at an early, not-yet-public stage of the legislative process — include taxing loans from life insurance policies, eliminating the deduction for interest paid on COLI loans, limits on the size of life insurance policies that can offer tax-free accumulation of cash values and restrictions on the use of life insurance by businesses.

NAIFA will bring together hundreds of advisors to Washington for its annual Congressional Conference May 22-23. Participants will network with their peers, benefit from main-stage presentations by NAIFA’s advocacy experts, and meet with representatives, senators and staff from every congressional office.

Don’t miss out on this opportunity to show your dedication to the industry. Register for the Congressional Conference today at and join NAIFA in preserving a favorable environment for you and the clients you serve.


Diane Boyle is senior vice president of NAIFA’s government relations department. Diane may be contacted at [email protected]

Diane Boyle, HIA, is the vice president of federal government relations for NAIFA. Contact her at [email protected] [email protected].

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