As a small business owner during the holiday season, you may find yourself giving gifts to clients and/or customers. Basically, the IRS will let your business deduct up to $25 for business gifts per person during a tax year. There is no limit on how many people you can give business gifts to during the year nor how much you spend on those gifts, although your business gift deduction is limited to $25 per recipient. For example, if you give your customer a $50 gift basket , be prepared to settle for a $25 deduction. However if during the course of a year, you give two gifts to a customer, one worth $10 and one worth $15, you can still claim the maximum $25 deduction. This limit does not include incidental costs such as packaging, gift wrapping, engraving or mailing costs. Costs are considered incidental if they don’t add substantial value to the gift.
Do you have the support you need to manage your small business bookkeeping?
Schedule a 30-minute appointment to speak with a local small business adviser.