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Can you write off gift to client tax deductible?

TL;DR

Gifts to clients are generally deductible, but the IRS limits the deduction to $25 per recipient per year. Many people mistakenly believe the entire gift amount is deductible.

Detailed Answer

The IRS allows a deduction for business gifts given to clients, but limits this deduction 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 shipping are not included in the $25 limit. Gifts to a company that will benefit multiple employees are considered a gift to one recipient. However, if you and your spouse both give gifts, the $25 limit is shared between you. Gifts that are promotional items with your business name permanently imprinted and cost less than $4 are not subject to the $25 limit. Additionally, entertainment gifts, such as tickets to an event, are treated differently and may fall under entertainment expense rules.

Where to Put It on the Tax Form

Schedule C, Line 27a

Real World Example

A freelance graphic designer gives a $40 coffee table book to a client as a thank-you gift. Only $25 of this gift is deductible. The designer should keep a record of the gift's cost and the client's name.

Audit Risk & Documentation Tips

Audit risk is moderate due to the potential for abuse. Keep detailed records of each gift, including the recipient's name, the cost of the gift, and the business purpose. Save receipts and any correspondence related to the gift to substantiate the deduction.

IRS Reference

IRS Publication 463, Travel, Gift, and Car Expenses.

Relevant Industries

FreelancersConsultantsReal Estate AgentsSales Professionals

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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 18, 2025