831(b) Micro Captive Insurance Calculator
Checks a small captive insurance company against the Section 831(b) premium limit and compares the tax under the 831(b) election, which taxes only taxable investment income, with the regular tax on underwriting profit plus investment income. The limit is $2,900,000 for taxable years beginning in 2026; the 2027 figure has not been published. All amounts are ones you enter.
A micro captive insurance company is a small insurer, usually owned by the business it insures, that elects under Section 831(b) of the Internal Revenue Code to pay tax only on its taxable investment income instead of on its underwriting profit. The election is open only to companies whose net written premiums, or direct written premiums if greater, do not exceed an inflation-adjusted limit: $2,900,000 for taxable years beginning in 2026.
Micro Captive Insurance: the 831(b) Tests
| Requirement | What the statute says |
|---|---|
| Premium limit | Net written premiums (or direct written premiums, if greater) of no more than $2,200,000, adjusted for inflation and rounded to the nearest $50,000. For 2026: $2,900,000 |
| Diversification | No more than 20% of premiums attributable to any one policyholder, or an alternative test based on ownership |
| Election | Applies to the year made and to later years in which the requirements are met; revocable only with IRS consent |
| Tax | The corporate rate of 21% applied to taxable investment income |
Worked Example
A captive writes $1,500,000 of premiums, pays $400,000 of losses and expenses and earns $75,000 of taxable investment income. Premiums are under $2,900,000, so the election is available. With the election, tax is 21% of $75,000, or $15,750. Without it, taxable income is the $1,100,000 underwriting result plus $75,000, and tax at 21% is $246,750. The difference is $231,000 for the year.
IRS Disclosure Rules for Micro-Captives
Final regulations published on January 14, 2025 (T.D. 10029) identify certain micro-captive transactions as listed transactions and others as transactions of interest. Both are reportable transactions: participants and material advisors must file disclosures with the IRS and face penalties for failing to do so. The regulations use, among other factors, the captive's loss ratio, which is why this calculator shows losses and expenses as a percentage of premiums. A low ratio does not by itself decide anything, but it is a figure the IRS looks at.
What the 2027 in the Address Means
The IRS publishes the inflation-adjusted limit for each year in a revenue procedure released late in the preceding year. The figure for taxable years beginning in 2027 was not available when this page was updated, so the calculator uses the 2026 limit from Rev. Proc. 2025-32.
Source and Disclaimer
This is arithmetic on your own figures, not a tax opinion. It does not test whether an arrangement has the risk shifting and risk distribution that insurance requires. Use an independent actuary and tax adviser.
Sources: 26 U.S.C. 831(b); IRS Rev. Proc. 2025-32, section .36 ($2,900,000 for 2026); 26 U.S.C. 11(b) (21%); T.D. 10029, 90 FR 3534. Last updated: October 2026.