Giving business gifts within limits

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in Small Business Tax,Small Business Tax Deduction Strategies

Q. I want to reward a good client with gifts to his staff. Can I give each one a tax-deductible business gift? L.M., Red Bank, N.J.

A. Yes. A business can deduct business gifts of up to $25 per person per year. This includes both direct and indirect gifts. For instance, if you give a gift to a customer’s spouse or child, it is treated as an indirect gift to the customer, falling within the $25 limit. However, if you give gifts to a group of employees, the gifts are treated as being made to all the individuals within that group.  

Tip: The $25 annual limit is paltry, but at least you don’t have to count incidental costs or gifts of a minimal value (e.g., coffee mugs or pens costing $4 or less).

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