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Is are client gifts tax deductible a valid tax write-off?

TL;DR

Client gifts are generally tax deductible, but the deduction is limited to $25 per recipient per year. This limit applies regardless of the cost of the gift.

Detailed Answer

The IRS allows a deduction for business gifts given to clients, but the deduction is capped at $25 per recipient per year. This means if you give a gift worth $50, only $25 is deductible. Incidental costs such as engraving or packaging do not count towards the $25 limit if they do not add substantial value to the gift. Gifts to a company are considered gifts to the individual(s) who benefit from them, unless you have no reason to know who the ultimate recipient is. Gifts that are promotional items with your business name permanently imprinted and cost $4 or less are not subject to the $25 limit.

Where to Put It on the Tax Form

Schedule C, Line 27a

Real World Example

A freelance graphic designer gives a $30 gift card to a client as a thank you for their business. The designer can only deduct $25 of this gift on their taxes. If they also give a $10 pen with their logo to the same client, the pen is fully deductible as a promotional item.

Audit Risk & Documentation Tips

Moderate. Keep detailed records of each gift, including the cost, the recipient's name, and the business purpose. Retain receipts and any correspondence that supports the business relationship. Document any incidental costs separately to ensure they are not included in the $25 limit.

IRS Reference

IRS Publication 463, Chapter 3, 'Gifts'.

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 15, 2025

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