Where Insurance Agency Owners Find Tax Savings: Commonly Missed Areas to Check Before December 31

Most insurance agency owners know they are probably paying more tax than they need to. What they do not know is where to look. The tax return will not tell you, because it only reports what already happened.

Here are some of the areas we look at when we review an agency's taxes before year-end, including the ones we most often see missed. Not every one applies to every agency. For each, here is what we look at and what to ask about your own agency before December 31.

The bottom line: The biggest savings for agency owners usually come from structure and pay, not from finding one more receipt. But most of these areas share a deadline. Your 2026 bill is mostly set by December 31, and with monthly payroll, many owners have only two paychecks left to act through.

Your Projected 2026 Tax Bill

Are you on track for 2026, for the agency and your household, based on your books through today?

To avoid an underpayment penalty, your 2026 payments generally need to reach the smaller of 90% of this year's tax or 100% of last year's (110% if last year's adjusted gross income was over $150,000). If you are short, extra federal withholding on your remaining paychecks is generally treated as paid evenly through the year. A late estimated payment is not.

Your Agency's Structure

This is where one of the largest savings usually sits. An agency taxed as a sole proprietorship or a partnership pays self-employment tax on essentially all of its profit. Taxed as an S corp, the owner who works in the agency is paid a reasonable salary through payroll, and the rest of the profit comes out as distributions without self-employment tax.

For one growing Minnesota agency still taxed as a partnership, fixing the structure alone put its 2026 federal tax about $29,000 lower. (Their story is in what a year-end planning review found for one growing agency.) An S corp is not right at every profit level, though. See when an S corp starts saving an agency owner money.

How You Pay Yourself

If you are already an S corp, the question is whether your salary fits your role and whether all of it actually ran through 2026 payroll. A salary that is too low invites IRS questions. A salary that is too high gives away savings. More in what the IRS looks at for reasonable compensation.

Your Retirement Plan

For many owners, this is the single biggest move still open this year. Your own 401(k) deferral has to come out of 2026 paychecks, from a plan that already exists. The 2026 limit is $24,500, plus $8,000 if you are 50 or older, or $11,250 if you are 60 through 63.

For a married Minnesota agency owner with $200,000 of profit and a $60,000 salary, deferring the full $24,500 saves about $7,000 in federal and Minnesota tax this year. The employer contribution can generally wait until the agency's return is due, but it is a percentage of the salary you actually ran. If you have no plan yet, compare your options in SEP-IRA vs. solo 401(k) for agency owners.

Expenses You Pay Personally

Home office, business mileage, and your phone are often paid personally and then forgotten. If your agency is taxed as an S corp or C corp, the clean way to deduct them is to have the agency reimburse you through a written accountable plan, and to pay the reimbursement in 2026. For 2026, the IRS business mileage rate is 72.5 cents a mile for January through June and 76 cents for July through December.

Health Insurance and HSA Contributions

Health insurance for an S corp owner has its own payroll reporting rules, and getting them wrong can cost the deduction. If you have a health savings account, check that contributions are being made and reported the right way before the year closes.

Timing Purchases and Payments

Computers, phones, and furniture count for 2026 only if they are in service by December 31. Some agency expenses can be paid before year-end instead of in January. The question is always whether the tax saved is worth using the cash now. Buy what you need, not what saves tax. A dollar spent to save 30 cents still leaves you 70 cents poorer.

Distributions, Loans, and Buying or Selling a Book

Money moving between you and the agency needs attention before year-end: distributions, loans in either direction, and any plan to buy or sell a book of business. A purchased book is generally written off over 15 years, and how the price is allocated can matter as much as the price itself. These are the decisions that are hardest to fix afterward.

Where to Start

You do not need to act on every one of these. You need to know which ones matter for your agency this year, what each is worth, and what has to happen by December 31. That starts with current books and a projected tax number. Everything else follows from there.

If you want a second look at your agency before the year closes, book a free discovery call. We work with insurance agency owners, and we will tell you whether there is something worth doing this year.