Posts Tagged ‘captive insurance’
10. P2P Lending: A New Asset Class?
9. A Lesson From a Client: Celebrity Business Gone Bad
8. The High Cost of Fee-Based Financial Advisors
7. How Often Do Market Corrections Happen?
6. Captive Insurance: A Business Owner’s Heaven?
5. How I Helped a Client Save $100k in One Meeting
4. Variable Annuity Fees You Don’t Know You are Paying
2. Be Careful When Buying a Condo as a Rental Property
1. Profit from Harry Dent’s Prediction? Think Again
Also see Top Ten in July.
Firm | Youtube | Facebook | Twitter | LinkedIn | Newsletter
Request White Paper | Request Discovery Meeting
Get informed about wealth building, sign up for The Investment Scientist newsletter
Share this:
Captive Insurance
I went to a conference for CPAs last week, and my biggest takeaway was a concept called captive insurance.
This is the concept of a business owner setting up an insurance company to insure the risk of his/her own business. Thus the name captive.
But what’s in it for one to have one’s own insurance company?
Tax Mitigation
It turns out that Congress has created legislation to encourage captive insurance – some would call that a tax loophole. IRC 831(b) states that small insurance companies ($1.2m or less in annual premium income) pay tax only on investment incomes. In other words, they don’t pay tax on premium income.
Can you see the tax loophole here? If a business pays its captive insurance company $1.2m in insurance premiums, the premium is deductible to the business and yet tax exempt to the captive insurance company. Depending on the tax structure of the business, this could mean a tax saving of 40% to 70%.
But tax savings aren’t the only major benefit!
Firm | Youtube | Facebook | Twitter | LinkedIn | Newsletter
The Investment Scientist 