Checkmark iconCan I Write This Off?

Is client gifts tax deductible tax deductible?

TL;DR

Client gifts are tax deductible, but there is a limit of $25 per recipient per year.

Detailed Answer

The IRS allows businesses to deduct up to $25 for business gifts given to each individual recipient per year. This limit applies to gifts given directly or indirectly. For example, if you give a gift to a client's family member, it is considered an indirect gift to the client. Incidental costs such as engraving or packaging are not included in the $25 limit if they do not add substantial value to the gift. However, gifts that are considered entertainment, like tickets to a sporting event, are not deductible as gifts but may be deductible as entertainment expenses under different rules.

Where to Put It on the Tax Form

Schedule C, Line 27a for sole proprietors; for corporations, it would be reported as a business expense on the corporate tax return.

Real World Example

A marketing consultant purchases personalized pens costing $20 each for 10 clients. The total cost is $200, but the deductible amount is limited to $250 ($25 per client).

Calculation Required

A calculation is required for this deduction.

Calculate the total cost of gifts per recipient and apply the $25 limit per recipient. For example, if you spend $30 on a gift, only $25 is deductible.

Audit Risk & Documentation Tips

Maintain detailed records of each gift, including the date, recipient, cost, and business purpose. Keep receipts and any correspondence related to the gift to substantiate the deduction in case of an audit.

IRS Reference

IRS Publication 463, Chapter 3

Relevant Industries

Small BusinessConsultantsSales ProfessionalsMarketing Agencies

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 15, 2025

Back to Search