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!
About GJR Consulting
Our CPA firm provides outstanding service to our clients because of our dedication to the three underlying principles of professionalism, responsiveness and quality. We will answer all of your questions, as they impact both your tax and financial situations. We welcome you to contact us anytime.
