1. FINANCIAL PLANNERS | For financial planners, changes in tax rates, deductions, credits, and the treatment of pass-through business income mean that many clients need to take another look at their existing strategies.
2. INVESTMENT PLANNERS | The creation of Qualified Opportunity Zones and the possibility of aggregating investments in those areas through pooled opportunity funds give investment planners new tools to help clients reach their objectives.
3. LIFE INSURANCE PRODUCERS | Changes to the transfer-for-value rules and new reporting requirements for viatical settlements pose additional compliance concerns for clients with complex commercial insurance policies.
4. EMPLOYEE BENEFIT SPECIALISTS | With the deduction for entertainment expenses curtailed and new rules regarding employee transportation and awards in place, employment benefit specialists should make sure that the company’s policies and practices in these areas are up to date.
5. ACCOUNTING CHANGES | Cash basis accounting is now available to wider group of small businesses, and may provide relief from complex Unicap rules.

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The Tax Cuts and Jobs Act of 2017 made a number of changes that are important to individuals, small businesses, and the advisors that assist them. Below, we briefly explore what these changes may mean for financial planners, investment planners, life insurance producers, employee benefit specialists, and small business accountants.


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1. Financial Planners

The Tax Cuts and Jobs Acts of 2017 made three significant changes to how individual tax liability is determined that may be important to financial planners. First, the ordinary income tax rates that will apply to individuals changed beginning in 2018. (The tax rates for trusts and estates also changed). Second, the standard deduction has nearly doubled. Finally, income from pass-through entities is, in many cases, eligible for up to a 20 percent deduction.

These changes can be important for financial planners for several reasons. First, many clients have made their tax plans based on previously existing marginal rates. With new rates, it can be worthwhile for planners to review their clients’ tax plans to see if the existing strategies need to be adjusted.

Similarly, the increase in the standard deduction can also change a client’s tax-planning strategy. With the new standard deduction amounts, items that taxpayers have traditionally used to generate deductions, such as mortgage interest and charitable donations, may not be as valuable anymore. In fact, for clients who were only slightly above the old standard deduction levels, many of the existing deductions will offer no tax advantages at all.

The new deduction for pass-through business income doesn’t apply to everyone (there are types of businesses that are ineligible, as well as income phase-outs). But for taxpayers who currently receive pass-through income (or who could receive it with some additional tax planning steps) and who are eligible for the deduction, it can make a meaningful difference in their tax liability. Like any other tax strategy, planners will have to evaluate each client’s situation on a case-by-case basis to see if utilizing the deduction is possible and makes sense.

2. Investment Planners

The Tax Cuts and Jobs Acts of 2017 creates an interesting new investment opportunity for individuals and investment planners in the form of newly created “Qualified Opportunity Zones.” Essentially, capital gains from the sale or exchange of property in one of these zones can be deferred, potentially as far out as the end of 2026. There are also new rules for calculating the basis for the property that is sold or exchanged that present additional opportunities for tax savings.

The new Tax Act allows each state to designate a number of opportunity zones, and “qualified opportunity funds” can be created to allow investors to pool their investments in an opportunity zone.

3. Life Insurance Producers

The tax law makes important changes in two rather complex areas that are of interest to life insurance planners and producers. First, there are changes to the transfer-for-value rules for commercial transfers. These include transfers where the acquirer of the policy has no substantial family, business or financial relationship with the insured individual apart from the interest in the life insurance contract.  These changes can affect taxpayers who are considering acquiring an interest in a partnership, trust or other entity that holds an interest in the life insurance contract.

Additionally, there are new reporting requirements for viatical settlements. Like the transfer-for-value rules for commercial transfers, these new rules apply to settlements in which the purchaser of the insurance contract has no family connection to the insured. While viatical settlements are still permitted, the new reporting requirements mean that executing a viatical settlement agreement will become more complex. Any planner who is contemplating a viatical settlement in 2018 or after should ensure that the settlement terms are compatible with the new rules and that the updated reporting requirements are met.

4. Employee Benefit Specialists

Employee benefit specialists should be aware of several changes in the tax law. First, the previously existing 50 percent deduction for entertainment expenses that are directly connected with a business activity is eliminated.  This applies to any activity considered entertainment, recreation or amusement, including membership dues with respect to any club organized for business, pleasure, recreational or social purposes.

Additionally, the new Tax Act eliminated deductions for expenses associated with providing any qualified transportation fringe to employees, and except for ensuring employee safety, any expense incurred for providing transportation (or any payment or reimbursement) for commuting between the employee’s residence and place of employment.  Employees can continue to pay for mass transit and parking benefits using pre-tax dollars through employer-sponsored salary reduction programs.

Finally, certain types of employee achievement awards may be taxable to the employee, and may no longer be deductible for the employer. These include award in the form of cash, cash equivalents, gift certificates, vacations, meals, lodging, tickets to sports or theater events, stocks, bonds, securities, and other similar items.

5. Accounting Changes

The Tax Cuts and Job Acts of 2017 expands the availability of cash basis accounting by providing that the cash method of accounting can be used by taxpayers that satisfy the gross receipts test regardless of whether the purchase, production, or sale of merchandise is an income-producing factor. The gross receipts test allows taxpayers with annual average gross receipts that do not exceed $25 million for the three prior tax years (the “$25 million gross receipts test”) to use the cash method.

Businesses that take advantage of the newly expanded availability of cash basis accounting will also be exempt for the complex and burdensome uniform capitalization (Unicap) rules. Like tax strategies for individuals, these changes in the tax code mean that business who may now be eligible for the expansion should reconsider their existing tax planning decisions to see if they can take advantage of the new rules.

Find Out More

This information is courtesy of Tax Facts, an online product that offers clear, current and reliable answers to pressing tax questions involving Insurance, Employee Benefits, Investments, Small Businesses and Individuals. For more information about Tax Facts, click here.


Robert Bloink’s insurance practice incorporates sophisticated wealth transfer techniques, as well as counseling institutions in the context of their insurance portfolios and other mortality-based exposures. Bloink, a professor at Texas A&M University School of Law, is working with William Byrnes, the associate dean of the law school, on development of executive programs for insurance underwriters, wealth managers and financial planners. Previously, Bloink served as senior attorney in the IRS Office of Chief Counsel, Large and Mid-Sized Business Division.

Willam H. ByrnesWilliam Byrnes is the leader of National Underwriter’s Financial Advisory Publications, having been appointed in 2010. He is a professor and an associate dean of Texas A&M University School of Law. His National Underwriter publications include Tax Facts, Advanced Markets, and Sales Essentials. Byrnes held senior positions of international tax for Coopers & Lybrand and has been commissioned and consulted by a number of governments on their tax and fiscal policy.