Business gift tax guide
Are business gifts tax deductible?
The short answer
Yes, but only $25 per person, per year, when it's treated as a gift. Engraving, gift boxes and shipping don't count toward that $25. Gifts to employees follow separate rules. Branded items given to promote your business may be treated as advertising instead of gifts. Every business is different, so confirm with your tax professional.
The $25 rule
The IRS lets you deduct up to $25 of business gifts per person each tax year. That limit was set in 1962 and has never been raised for inflation. In 1962, $25 bought a nice dinner out. Today it barely covers a bottle of wine.
Here's how it plays out on a typical client gift treated as a gift:
| Cost | Amount |
|---|---|
| Engraved Cutco gift | $150 |
| Deductible as a business gift | $25 |
| Not deductible as a gift | $125 |
A few more details from the IRS rules:
- Spouses count as one. If you and your spouse both give a gift to the same person, you share a single $25 limit.
- Gifts to a couple. A gift to your client's spouse generally counts as a gift to your client, unless the spouse has their own business relationship with you.
- Gifts through someone else count. A gift meant for a specific person still counts toward that person's $25, even if you send it to their company.
What doesn't count toward the $25
Incidental costs
Engraving, gift wrapping, packaging, insurance and shipping generally aren't part of the gift's cost. They can be deducted as ordinary business expenses.
Small branded items
Items that cost $4 or less, have your name permanently printed on them and are given out widely (think pens or magnets) aren't counted as gifts at all.
Display items
Signs, display racks and other promotional materials used on the recipient's business premises aren't treated as gifts.
Entertainment
Tickets to a game or show you attend with a client are entertainment, which hasn't been deductible since 2018. Tickets you give away without attending can be treated as a gift.
Where branded gifts fit
This is the question most business owners ask: if a $150 knife carries my logo and contact information, is it still a "gift"?
Many businesses and their accountants treat branded items given to promote the business as an advertising and marketing expense, which isn't subject to the $25 gift limit. The logic is simple: every time your client uses that knife, they see your name. It works like any other piece of advertising, except they keep it for decades.
Ask your tax professional: "Can engraved client gifts with our logo be categorized as advertising for our business?" How a gift is categorized depends on your business and the details of the gift, so get a clear answer before you file.
Gifts for employees
Employee gifts follow different rules than client gifts:
- Cash and gift cards are taxable wages. They have to go through payroll, no matter how small.
- Small, occasional items like a holiday ham or a coffee mug can be tax-free to the employee as a "de minimis" fringe benefit.
- Employee achievement awards can be deductible and tax-free to the employee when they're tangible items (not cash or gift cards) given for years of service or safety, up to $400 per employee per year, or $1,600 under a qualified written plan. An engraved Cutco piece for a five-year anniversary is a classic example.
Keep good records
For every business gift, write down:
- What you gave and what it cost
- The date you gave it
- Who received it and their business relationship to you
- The business reason for the gift
Your gift receipts and engraving proofs from us make this easy to document.
Plan your gifts
Gifts they'll use every day, with your name on them
Tell us your list and budget, and Curtis will put together options and pricing.
Get a Gift QuoteThis guide is general information based on IRS Publication 463 and related IRS guidance, not tax or legal advice. Tax rules change and depend on your situation. Please talk with a qualified tax professional before deciding how to deduct any gift.