Buying a gift for your client or customer can keep relationships strong! Not only can a client feel good about receiving a gift, but a business owner can also win if the gift falls under a certain requirement that will allow for a tax deduction!
The Magic Number is 25!
The maximum deduction you can take for a business gift is $25 per recipient, per year, any amount over is taxable. It’s important to understand that incidental gift costs do not count towards the $25, i.e. gift wrapping, shipping, engraving. It is not considered an incidental cost if it adds substantial value to the gift, i.e. buying a glass vase for a bouquet of flowers.
Remember, if you give your customer a gift ($25 maximum) for his/her child’s graduation celebration or special occasion, it will be treated as a gift directly to the customer UNLESS there is proof an actual business relationship with his/her child. In other words, you have already take the deduction for this customer and any other gifts given will be taxable.
What Can’t be Considered a Business Gift?
The following items are not considered gifts:
- An item that costs $4 or less and:
- Has your name permanently imprinted on the gift
- Is one of the number of identical items you widely distribute: pens, pencils, cases
- Signs, display racks & other promotional material to be used on the business premises of recipient
The items mentioned above will be considered promotional gifts.
It’s a good idea to keep your receipts for the business gifts purchased and get advised on whether you can deduct incidental costs elsewhere!
