Happy New Year! It’s always great to start a new year with some good news. For starters, Congress recently passed tax cuts that will help many businesses in the U.S. Also, for small and mid-market businesses that self-insure risk through a captive insurance company, the IRS just raised the limit for the 831(b) tax election from $2.2 million to $2.3 million. Captive Review recently ran the headline: “IRS Increases 831(b) Limit By $100,000.” The 831(b) tax election was created in 1986 and was designed to incentivize small and mid-market companies to own their own insurance companies.
The 831(b) election initially applied to “small” insurance companies that received premiums of $1.2 million or less annually. The 2015 PATH ACT increased the limit to $2.2 million and indexed it to inflation. Each year, the IRS will be required to post new premium limits for 831(b) based on inflation. It appears the IRS will be publishing Good News every New Year for the Captive Insurance Industry.