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Is client gift tax deduction a valid tax write-off?

TL;DR

Client gift expenses are generally deductible, but there is a $25 limit per recipient per tax year. Many people mistakenly believe they can deduct more if the gift is more expensive.

Detailed Answer

The IRS allows a deduction for business gifts, but it is limited to $25 per recipient per year. This means if you give a client a gift worth $100, you can only deduct $25. Incidental costs such as engraving or packaging do not count towards this limit. Gifts to a company are considered to be gifts to the individual who receives the gift, unless you have no reason to know who will receive it. If you give a gift to a client and their spouse, the $25 limit applies to the couple as one recipient. Promotional items that cost $4 or less, have your name clearly and permanently imprinted, and are one of a number of identical items you widely distribute 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 buys a $50 gift card for a client as a thank you for a referral. The designer can only deduct $25 of this expense on their Schedule C. The designer should keep the receipt and a note explaining the business purpose of the gift.

Audit Risk & Documentation Tips

Audit risk is moderate due to the potential for abuse. Keep detailed records including receipts, the business purpose of the gift, and the recipient's information. 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 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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