GIFTS TO CLIENTS

If you give gifts to clients in the course of your trade or business, you can deduct all or part of the cost.  The following explains the limits and rules for deducting the costs of gifts.

You can deduct no more than $25.00 for each business gift you give directly or indirectly to any one person during your tax year.  A gift to a company that is intended for the eventual personal use or benefit of a particular person or a limited class of people will be considered an indirect gift to that particular person or to the individuals within that class of people who receive the gift.

If you give a gift to a member of a customer’s family, the gift is generally considered to be an indirect gift to the customer.  This rule does not apply if you have a business connection with that family member and the gift is not intended for the customer’s eventual use.

If you and your spouse both give gifts, both of you are treated as one taxpayer.  It does not matter whether you have separate businesses, are separately employed, or whether each of you has an independent connection with the recipient.

Incidental costs, such as engraving on jewelry, or packaging, insuring, and mailing, are generally not included in determining the cost of a gift for purposes of the $25.00 limit.

The following items are not considered gifts for purposes of the $25.00 limit:

1.      An item that costs $4.00 or less and:

a. Has your name clearly and permanently imprinted on the gift and

b.    Is one of a number of identical items you widely distribute.

 

2. Signs, display racks, or other promotional material to be used on the business premises of the recipient.

 

 Source: IRS & Other