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How do I deduct client gift tax deduction on my taxes?

TL;DR

Client gifts are generally deductible up to $25 per recipient per year, with specific rules and limitations to consider.

Detailed Answer

The IRS allows a deduction for business gifts up to $25 per recipient per year. This limit applies regardless of the number of gifts given to the same person. Gifts that are considered incidental, such as wrapping or shipping costs, do not count towards the $25 limit. Gifts that are promotional items with your business name that cost $4 or less, or gifts given to a company rather than an individual, may not be subject to the $25 limit. However, gifts that could be considered entertainment, such as tickets to an event, are subject to different rules and may not be deductible as gifts.

Where to Put It on the Tax Form

Schedule C, Line 27a

Real World Example

A freelance graphic designer gives a $20 coffee gift card to each of her top 5 clients as a holiday gift. She can deduct $20 for each client, totaling $100, as this is within the $25 per recipient limit.

Audit Risk & Documentation Tips

Moderate audit risk. Keep detailed records including the date, description, and business purpose of the gift, as well as receipts. Document the recipient's name and relationship to your business. Consider maintaining a log to track gift expenses and ensure compliance with the $25 limit.

IRS Reference

IRS Publication 463

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 25, 2025

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