Checkmark iconCan I Write This Off?

Is are client gifts tax deductible tax deductible?

TL;DR

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

Detailed Answer

The IRS allows a deduction for business gifts to clients, but the deduction is limited to $25 per recipient per year. This means if you give a client multiple gifts throughout the year, the total deduction cannot exceed $25. Gifts must be directly related to your business, and you must keep records of the gift's cost and the business purpose. Common misconceptions include thinking the limit is per gift rather than per recipient, or that the limit can be exceeded if the gift is shared among multiple recipients (e.g., a gift basket for an office). Promotional items with your business name that cost $4 or less are not subject to the $25 limit.

Where to Put It on the Tax Form

Schedule C, Line 27a for sole proprietors. For partnerships and corporations, it would be included in 'Other Deductions' on Form 1065 or Form 1120.

Real World Example

A freelance graphic designer gives a $50 gift card to a client as a thank you for their business. The designer can only deduct $25 of this gift on their taxes. The designer should record the gift's cost, the recipient's name, and the business purpose in their records.

Audit Risk & Documentation Tips

Moderate audit risk. Taxpayers should keep detailed records of each gift, including receipts, the recipient's name, and the business purpose. It's advisable to document how the gift relates to business activities and to ensure that the total deduction per recipient does not exceed $25.

IRS Reference

IRS Publication 463, Chapter 3, 'Gifts'.

Relevant Industries

FreelancersConsultantsReal Estate AgentsSales Professionals

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