Ho ho huh? Business gift giving explained.
It’s that time of year again, so you’re probably gearing up to purchase holiday gifts for your clients (and since today is Dec 10, if you haven’t started on this yet, you probably should). The IRS has some pretty cut-and-dried rules around business gift giving, so this is an easier topic to -- ha! -- unwrap.
Basically, the rule is this: You can deduct as a business expense up to $25 in gifts per recipient per year. That’s it!
That said, there are a couple of important footnotes:
Incidental costs don’t count towards that $25 per person per year limit. What are incidental costs? Costs such as packaging, engraving, and mailing that are peripheral to the gift but don’t also add substantial value are incidental. In other words, if you present that fruit basket in a diamond-studded box, the packaging costs are no longer “incidental.”
Any item that has your business name clearly and permanently emblazoned on it and is identical to other items that you broadly distribute and costs $4 or less- a.k.a. SWAG - does not count towards the $25. So keep ordering those pens and mouse pads with your logo on them!
Happy holidays, everyone!
