Can I Write This Off?

are client gifts tax deductible

TL;DR

Client gifts are tax deductible, but there is a limit of $25 per recipient per year.

Detailed Answer

The IRS allows businesses to deduct up to $25 for business gifts given to each recipient per year. This limit applies regardless of the number of gifts given to the same person. If a gift exceeds $25, only $25 is deductible. Incidental costs such as engraving, packaging, or mailing are not included in the $25 limit. For example, if you give a client a gift worth $30, you can only deduct $25. However, if you also spend $5 on shipping, the total deductible amount would be $30 ($25 for the gift and $5 for shipping).

Where to Put It on the Tax Form

Report this deduction on Schedule C (Form 1040) under 'Other Expenses'.

Real World Example

A freelance graphic designer sends a $20 coffee mug to a client as a thank-you gift. The designer can deduct the full $20 as it is under the $25 limit.

Calculation Required

A calculation is required for this deduction.

To calculate the deductible amount, sum the cost of gifts given to each recipient and apply the $25 limit per recipient. If incidental costs apply, add those to the deductible amount.

Audit Risk & Documentation Tips

To minimize audit risk, keep detailed records of each gift, including the date, recipient, cost, and business purpose. Retain receipts and any correspondence related to the gift.

IRS Reference

IRS Publication 463, Chapter 3: Gift Expenses

Relevant Industries

Small BusinessConsultantsSales ProfessionalsFreelancers