Black Friday is coming up and you want to buy, buy, and buy. Those of you shopping for colleagues, clients, etc will want to know how to write off business gifts. We will show you how to do it the right way below.
1. Pay Attention to the Price Tag
You may have a budget for each person on your list. However, did you know the IRS only allows you to deduct up to a certain amount? The current amount is $25 per gift, per person. For example, if you buy a $10 gift, you may deduct the $10. If you buy a $50 gift, you may only deduct $25. You may also not buy 2 $25 gifts for the same person and deduct both. Keep this in mind when planning.euh
2. Group Gifts Are Better
The above does not apply to gifts for a business, just for individuals. For example, if you want to buy a large gift basket for your best clients, the $25 limit does not apply. The $25 limit does not apply either to certain types of gifts, such as tickets to events like sports, theater, concert, etc. However, you may not attend with the client.
3. Know About Incidental Costs
Incidental costs are expenses that are not generally included in determining the gift costs for purposes of the $25 limit. This includes items that don’t add a “substantial value to the gift.” This includes items such as such as jewelry engravement, gift wrapping, packaging, mailing, or insurance. However, there are many confusing exceptions. Gift wrapping is considered an incidental cost. But you may purchase a gift that is already wrapped, such as an ornamental fruit basket.
4. Other Tips and Tricks
Tons of other exceptions lie with this rule. For example, you may not claim business gifts that cost less than $4. You may not claim the deduction for a gift with your or your business’s name on it. This can include all sorts of promotional items from pens to paper weights. However, there may be other deductions for these types of expenses.
5. Know the Rules
The IRS has tons of rules for these types of deductions, which is why recommend you consult with your bookkeeper or accountant before applying for them. The IRS defines a business gift as “a gift given in the course of your trade.” Your spouse and family will not count in many cases, unless they are officially on the payroll.
- The cost of the gift.
- Date gift was purchased.
- Business purpose of the gift.
- Gift description.
- Business relationship to gift recipient.
- Of course, receipt for the gift.
Read more about writing off business gifts by visiting the IRS page.
Houston Bookkeeping & How to Write Off Business Gifts
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