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- The Internal Revenue Service (IRS) laid out the rules (in publications in Rev. Rul. 2002-89 and Rev. Rul. 2002-90) under which captive insurance constitutes insurance for federal income tax purposes so that premiums are deductible.
www.investopedia.com › articles › managing-wealthIs Captive Insurance a Legitimate Tax Shelter? - Investopedia
Jan 4, 2017 · Generally, premiums paid for insurance are deductible for federal income tax purposes in the year paid if the policy is an annual policy and are amortized over the policy period for a multiyear policy.
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Mar 6, 2023 · For a captive insurer that qualifies, the federal tax benefit is related to the timing of deductions. A captive is allowed to take a federal tax deduction for unpaid amounts on retained risks (also called reserves), whereas a self-insurer can only take deductions for paid amounts on retained risks.
Generally, in a captive arrangement, the parent entity is entitled to deduct amounts paid as insurance premiums to the captive subsidiary and the captive itself can elect to be taxed only...
May 6, 2024 · Premiums paid to a captive insurer can be tax-deductible if the arrangement meets certain risk-distribution standards. Thus, the business gets a current year write-off even though losses...
May 22, 2023 · The IRS has vigorously scrutinized and sometimes challenged captives. In an attempt to provide parameters for captive insurance arrangements to be treated as insurance companies for federal income tax purposes, the IRS and Treasury Department have issued a variety of guidance.
The insurance premium paid is a tax deductible for the operating business, and the premium revenue received by the captive insurance company is frequently tax-free. The business owner, his spouse, his relatives, a Trust, or any other entity can own a captive.
A captive must be licensed as an insurance company through a state or foreign jurisdiction and satisfy certain requirements for the premiums to be deductible as insurance for federal tax purposes. Assuming that the captive meets the requirements, its taxable income is typically based on underwriting income with some required adjustments for tax ...
