Checkmark iconCan I Write This Off?

Is gift to client tax deductible a valid tax write-off?

TL;DR

Gifts to clients can be tax deductible, but there are specific limitations and conditions.

Detailed Answer

The IRS allows businesses to deduct up to $25 per recipient per year for business gifts. This limitation applies to gifts given directly or indirectly to a client or customer. If a gift is given to a client's family member, it is considered an indirect gift to the client. Items that are promotional in nature and cost less than $4, or items that are widely distributed and have the business's name clearly imprinted, do not count toward the $25 limit.

Where to Put It on the Tax Form

Schedule C, Line 27a for sole proprietors; Schedule A for itemized deductions if applicable.

Real World Example

A marketing consultant gives a $20 branded pen set to each of their top clients during the holiday season. The consultant can deduct $20 for each client as a business gift expense.

Calculation Required

A calculation is required for this deduction.

Calculate the total amount spent on gifts for each client and ensure it does not exceed $25 per client per year. For example, if you give a $20 gift and a $10 gift to the same client in one year, only $25 is deductible.

Audit Risk & Documentation Tips

Keep detailed records of each gift, including the cost, date, description, and business purpose. Retain receipts and any correspondence that supports the business relationship. Be mindful of the $25 limit to avoid disallowance of deductions.

IRS Reference

IRS Publication 463, Chapter 3

Relevant Industries

Small BusinessConsultantsSales ProfessionalsMarketing Agencies

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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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