Encore Partners
  • About Us
    • Who We Are
    • Client Testimonials
    • Careers
  • Services
  • Insight
  • Contact
  • Client Payments
  • Client Portal
  • Menu Menu

Can officers and shareholders deduct corporate expenses?

July 30, 2021/in News, Tax Tips - Business/by Betty Kim

Do you play a major role in a closely held corporation and sometimes spend money on corporate expenses personally? These costs may wind up being nondeductible both by an officer and the corporation unless proper steps are taken. This issue is more likely to arise in connection with a financially troubled corporation.

Deductible vs. nondeductible expenses

In general, you can’t deduct an expense you incur on behalf of your corporation, even if it’s a legitimate “trade or business” expense and even if the corporation is financially troubled. This is because a taxpayer can only deduct expenses that are his own. And since your corporation’s legal existence as a separate entity must be respected, the corporation’s costs aren’t yours and thus can’t be deducted even if you pay them.

What’s more, the corporation won’t generally be able to deduct them either because it didn’t pay them itself. Accordingly, be advised that it shouldn’t be a practice of your corporation’s officers or major shareholders to cover corporate costs.

When expenses may be deductible

On the other hand, if a corporate executive incurs costs that relate to an essential part of his or her duties as an executive, they may be deductible as ordinary and necessary expenses related to his or her “trade or business” of being an executive. If you wish to set up an arrangement providing for payments to you and safeguarding their deductibility, a provision should be included in your employment contract with the corporation stating the types of expenses which are part of your duties and authorizing you to incur them. For example, you may be authorized to attend out-of-town business conferences on the corporation’s behalf at your personal expense.

Alternatively, to avoid the complete loss of any deductions by both yourself and the corporation, an arrangement should be in place under which the corporation reimburses you for the expenses you incur. Turn the receipts over to the corporation and use an expense reimbursement claim form or system. This will at least allow the corporation to deduct the amount of the reimbursement.

Contact us if you’d like assistance or would like to discuss these issues further.

Tags: Expenses
Share this entry
  • Share on Facebook
  • Share on X
  • Share on LinkedIn
  • Share by Mail
https://encorepartnersllp.com/wp-content/uploads/2021/07/Corporate-Expenese.png 292 560 Betty Kim https://encorepartnersllp.com/wp-content/uploads/2021/02/Logo_hex2-1030x266.png Betty Kim2021-07-30 08:00:002021-07-30 11:44:04Can officers and shareholders deduct corporate expenses?
You might also like
Six tax issues to consider if you’re getting divorced

Newsletter Signup

Connect With Us

  • Facebook
  • LinkedIn
  • Twitter

Categories

  • Encore Culture
  • Events
  • News
  • Tax Tips – Business
  • Tax Tips – Individual

Search

Recent Posts

  • Spousal IRAs: A smart retirement strategy for couplesJuly 9, 2025 - 3:34 pm
  • Milestone moments: How age affects certain tax provisionsJuly 2, 2025 - 3:16 pm
  • Is college financial aid taxable? A crash course for familiesJune 24, 2025 - 2:44 pm
  • The advantages of a living trust for your estate planJune 5, 2025 - 12:04 pm

Get the latest tax and finance news

right in your inbox


Encore Partners Logo
  • Email
  • Facebook
  • LinkedIn
  • Twitter

Main Office
4350 Executive Drive
Suite 260
San Diego, CA 92121
858.549.7100

Beverly Hills Office
9465 Wilshire Blvd,
Suite 300
Beverly Hills, CA 90212
310.300.8480

© Encore Partners LLP 2024 – all rights reserved

site design by digitalstoryteller.io

© Encore Partners LLP 2024 – all rights reserved
site design by digitalstoryteller.io

There’s currently a “stepped-up basis” if you inherit property — but...[IRS Tax Tip] Here’s why taxpayers should have an IRS online account Scroll to top

This site uses cookies. By continuing to browse the site, you are agreeing to our use of cookies.

Accept All CookiesRefuse Cookies

Cookie and Privacy Settings



How we use cookies

We may request cookies to be set on your device. We use cookies to let us know when you visit our websites, how you interact with us, to enrich your user experience, and to customize your relationship with our website.

Click on the different category headings to find out more. You can also change some of your preferences. Note that blocking some types of cookies may impact your experience on our websites and the services we are able to offer.

Essential Website Cookies

These cookies are strictly necessary to provide you with services available through our website and to use some of its features.

Because these cookies are strictly necessary to deliver the website, refusing them will have impact how our site functions. You always can block or delete cookies by changing your browser settings and force blocking all cookies on this website. But this will always prompt you to accept/refuse cookies when revisiting our site.

We fully respect if you want to refuse cookies but to avoid asking you again and again kindly allow us to store a cookie for that. You are free to opt out any time or opt in for other cookies to get a better experience. If you refuse cookies we will remove all set cookies in our domain.

We provide you with a list of stored cookies on your computer in our domain so you can check what we stored. Due to security reasons we are not able to show or modify cookies from other domains. You can check these in your browser security settings.

Google Analytics Cookies

These cookies collect information that is used either in aggregate form to help us understand how our website is being used or how effective our marketing campaigns are, or to help us customize our website and application for you in order to enhance your experience.

If you do not want that we track your visit to our site you can disable tracking in your browser here:

Other external services

We also use different external services like Google Webfonts, Google Maps, and external Video providers. Since these providers may collect personal data like your IP address we allow you to block them here. Please be aware that this might heavily reduce the functionality and appearance of our site. Changes will take effect once you reload the page.

Google Webfont Settings:

Google Map Settings:

Google reCaptcha Settings:

Vimeo and Youtube video embeds:

Other cookies

The following cookies are also needed - You can choose if you want to allow them:

Privacy Policy

You can read about our cookies and privacy settings in detail on our Privacy Policy Page.

Accept settingsHide notification only