Are Business Gifts Deductible
During the holidays, there are a lot of business owners out there who are giving gifts to their customers as a way for them to say thank you for patronizing their brand and their products or services. In return, the IRS will provide these business owners a deduction in the cost of the gifts.
However, before you go around and shop, it is important to check your listing twice for the reason that there are some strict limitations that you should keep in mind when it comes to the way you can deduct.
The General Rule about Business Gift Deductible
The Internal Revenue Service will permit your business to deduct as much as $25 for the business gifts that you will be giving to anyone every year. There’s no limitation on the number of people who can receive a business gift from you throughout the year and how much you can spend for those gifts though the deduction will be just $25 for each recipient. It only means that when you give your customer a business gift that is worth $50 then you will still get only $25 deduction. This limit amount doesn’t include the incidental costs like packaging, engraving, gift wrapping, and the mailing cost. The cost will be considered incidental when they do not add a substantial value to the gift.
When you and your spouse both provide a business gift to one person, for tax deduction, you will still be considered as one person. It is true especially when the two of you have individual business connections with that recipient. When you present a gift to one of the members of the family of your customer, the business gift will be generally regarded as an indirect present to your customer. This particular IRS rule doesn’t apply when you’ve a bona fide or independent business relationship with a member of your family, provided that it’s intended for the client’s eventual use.
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This is how you will be able to receive a deduction when you give business gifts to your loyal customers. You can have the best return for your expenses despite the limited amount of deduction that you can have in total. It already counts.
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In starting businesses it is important to distinguish the tax deductibles early on especially if you will be working with several personal or home related functions from which you will have to divide the percent of its use for personal and business.
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