Can Freelancers Deduct Gift To Client Tax Deductible?

Detailed Answer

Gifts to clients are deductible as a business expense, but the IRS imposes a $25 limit per recipient per year. This means if you give a client a gift worth $50, only $25 is deductible. The gift must be directly related to your business and given with the expectation of a business benefit. Items that are considered promotional materials, such as pens or calendars with your business name, may not be subject to this limit if they are intended for general distribution. Gifts to a company, rather than an individual, are also subject to the $25 limit if the gift is intended for the use of a specific person. Exceptions include items like plaques or trophies, which are considered awards rather than gifts.

Where to Put It on the Tax Form

Schedule C, Line 27a, 'Other Expenses'.

Real World Example

A freelance graphic designer gives a $20 coffee gift card to a client as a thank you for a referral. This gift is deductible as it is under the $25 limit. If the designer also gives the same client a $30 book, only $25 of the total $50 spent on gifts to that client is deductible.

Audit Risk & Documentation Tips

The audit risk for this deduction is moderate. To defend this deduction, keep detailed records including receipts, the business purpose of the gift, and the recipient's name. Maintain a log of all gifts given throughout the year to ensure compliance with the $25 limit per recipient.

Can freelancers deduct gift to client tax deductible?

TL;DR

Detailed Answer

Where to Put It on the Tax Form

Real World Example

Audit Risk & Documentation Tips

IRS Reference

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