Now that the holidays are over, don’t forget to officially write them off-from a tax perspective of course. Although the Internal Revenue Service (IRS) and the Real Estate Settlement Procedures Act (RESPA) have very stringent guidelines on what you can and cannot write-off, gift giving to clients is a deductible business expense based on the following:
The $25 Gift Rule
A business deduction on a gift given to an individual is limited to $25 per person, per year. This may also apply to a member of a client’s family.
A gift given to a company is treated differently than that given to an individual. Under this circumstance, you can write-off the business expense in its entirety. If you send the gift to a specific individual within the company, however, it is applicable to the $25 Gift Rule.
Tickets given as business gifts for sporting events, music performances, etc. are tax deductible as long as you do not attend the event with your client. You may deduct $25 of the ticket price. If the cost of the ticket exceeds $25, you are better off treating it as an entertainment expense of which you can deduct 50% of the total cost.
Low Cost Gifts
Gifts under $4 per unit cost that are branded with your company name and exist in quantity are not considered gifts for tax-deductible purposes. Example: Pens, key chains, etc.
For more specific details relating to business expenses and tax deductions, confer with your CPA or financial adviser.