Checkmark iconCan I Write This Off?

Can I deduct gift to client tax deductible?

TL;DR

Gifts to clients are generally deductible, but there is a strict limit of $25 per recipient per year. Exceeding this limit is a common misconception.

Detailed Answer

The IRS allows a deduction for business gifts up to $25 per recipient per year. This means if you give a client a gift worth $50, only $25 is deductible. Incidental costs such as engraving, packaging, or mailing are not included in the $25 limit. Gifts that are considered promotional items with your business name permanently imprinted and costing $4 or less are not subject to the $25 limit. Additionally, gifts to a client's family member are considered gifts to the client unless there is a bona fide business relationship with the family member.

Where to Put It on the Tax Form

Schedule C, Line 27a

Real World Example

A freelance graphic designer sends a $20 coffee mug with their logo to a client as a holiday gift. This is fully deductible as it is under the $25 limit. If they also send a $10 box of chocolates, only $5 of the chocolates is deductible, totaling $25 for the year.

Audit Risk & Documentation Tips

Moderate audit risk. Keep detailed records including receipts, the date of the gift, the business purpose, and the recipient's name. Document any incidental costs separately to ensure they are not included in the $25 limit.

IRS Reference

IRS Publication 463, Chapter 3

Relevant Industries

FreelancersConsultantsReal Estate AgentsSmall Business Owners

Popular Related Pages

Disclaimer: This is for informational purposes only and should not be construed as tax or legal advice. Always consult your tax advisor.

Page created on July 25, 2025

Back to Search