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New Business: December tax moves to consider for your business

| December 03, 2014

2014 is winding down, but you still have time to wrap up business tax strategies before December 31. Here are five to put on your list.

  • Make capital contributions if necessary. When you have losses in your Subchapter S corporation, the amount you can deduct on your personal tax return may be restricted. That's because losses are limited to your basis. Injecting capital or making a direct loan to your business before year-end can help increase your basis.
  • Review inventory. Remove obsolete, unsalable, or damaged items to reduce your year-end inventory balance. Donating inventory to qualified charities may result in an enhanced deduction.
  • Establish a retirement plan. December 31 is the last day to set up certain retirement plans in order to take a deduction on your 2014 return.

    What if you like the idea but will be a little short of cash this month? In some cases, you can wait until the due date of your tax return, including extensions, to make the actual contribution — and still claim a deduction in the current year.
  • Pay health insurance premiums. When you own more than 2% of your S corporation, premiums you pay personally for your health and long-term care insurance must be reimbursed to you in order to get the most benefit. When accounted for properly, premiums are included on your Form W-2 as wages, and are deductible on your individual income tax return whether you itemize or not.
  • Update corporate minutes. Document the reasons for business decisions, such as why you chose a salary level, or your approval of an expense reimbursement plan.