Are the gift baskets we gave to our business clients tax deductible?

December 09, 2015 by Dave Du Val, EA
Wrapped gift

Hey Dave,

We have our own marketing and design business. This year we ordered expensive gourmet chocolate gift baskets for each of our ten clients to thank them for making 2015 our most successful year ever. Each basket will cost almost $200.  Can we deduct the costs of these business gifts?

Harold and Maude

 

Dear Harold and Maude,

Congratulations to you both on your successful business year! While you will likely be able to deduct only a portion of the amount you are spending, I hope that doesn’t stop you from showing your appreciation to your clients.

The general rule is, you are allowed to deduct up to $25.00 of the costs of the business gifts you give to each person per year. This includes the recipient’s family members, unless you have a bona fide independent relationship with the family member as well. In other words, only $25.00 per family is allowed as a business gift deduction.

If there are multiple people who will be sharing the baskets and you have a bona fide business relationship with each of them, the amount of your deduction will depend on the number of people who share the gift.

As a married couple, you are considered one taxpayer for the purpose of this deduction, and therefore, the total amount you will be able to deduct for ten business clients is $25 X 10, or $250. If, however, there are five people you work with at each company who share the gift, you would be able to deduct $25 for each of them − $25 X 5 X 10, or $1,250 − or half of the $2,500 you will be spending on the baskets.

I wish you both continued success in 2016. And Happy Holidays!

Deductibly Yours,

Dave

Recent Articles

IRS Audit
Generally, the IRS has three years from the date the return is filed to conduct an audit. However, there are exceptions to this three-year rule.
Money, United States Treasury Check, 1040 Tax Form
If you paid off a prior year state or local tax obligation to your state, you can include these payments as a state tax deduction, subject to the $10,000 cap.
standard deduction or itemized deduction
Most taxpayers are familiar with the terms standard deduction and itemized deductions, but many are unaware of the differences between the two.
Couple with moving boxes on their heads with happy faces drawn on them
The moving expenses deduction was eliminated for all tax years from 2018 through to 2025 for all taxpayers except those who are members of the Armed Forces.

SEARCH

 

David E. Du Val, EA
Chief Compliance Officer for TRI Holdco

 

Dave Du Val, EA, is Chief Compliance Officer for TRI Holdco. Inc., the parent company of TaxAudit, and Centenal Tax Group. A nationally recognized speaker and educator, Dave is well known for his high energy and dynamic presentation style. He is a frequent and popular guest speaker for the California Society of Tax Consultants, the California Society of Enrolled Agents and the National Association of Tax Professionals. Dave frequently contributes tax tips and information to news publications, including US News and World Report, USA Today, and CPA Practice Advisor. Dave is an Enrolled Agent who has prepared thousands of returns during his career and has trained and mentored hundreds of tax professionals. He is a member of the National Association of Tax Professionals, the National Association of Enrolled Agents and the California Society of Enrolled Agents. Dave also holds a Master of Arts in Education and has been educating people since 1972. 


 

Recent Articles

IRS Audit
Generally, the IRS has three years from the date the return is filed to conduct an audit. However, there are exceptions to this three-year rule.
Money, United States Treasury Check, 1040 Tax Form
If you paid off a prior year state or local tax obligation to your state, you can include these payments as a state tax deduction, subject to the $10,000 cap.
standard deduction or itemized deduction
Most taxpayers are familiar with the terms standard deduction and itemized deductions, but many are unaware of the differences between the two.
Couple with moving boxes on their heads with happy faces drawn on them
The moving expenses deduction was eliminated for all tax years from 2018 through to 2025 for all taxpayers except those who are members of the Armed Forces.
This blog does not provide legal, financial, accounting, or tax advice. The content on this blog is “as is” and carries no warranties. TaxAudit does not warrant or guarantee the accuracy, reliability, and completeness of the content of this blog. Content may become out of date as tax laws change. TaxAudit may, but has no obligation to monitor or respond to comments.