The IRS allows a deduction for business gifts up to $25 per recipient per year. This limit has not been updated since 1962 and applies per person, not per gift. Incidental costs (gift wrapping, engraving) do not count toward the $25 limit.
Getting the deduction right is not just about whether it is allowed — it is about how you set it up.
The gift must be given in the course of your business to a client, customer, or business associate.
Keep receipts for all gifts. Note the recipient's name and business relationship on each receipt.
Deduct up to $25 per recipient per year on Schedule C. Track all gifts to the same recipient to avoid exceeding the limit.
Do not deduct gifts above $25 per person. Do not confuse gifts with entertainment (entertainment is not deductible).
Give gifts under $25 to maximize the deduction. Consider promotional items (branded merchandise) which may qualify as advertising rather than gifts.
When structured correctly, this deduction can significantly reduce your taxable income.
Here is how this deduction typically works in real situations:
A freelancer sends holiday gifts to 20 clients at $25 each.
An S-Corp sends $100 gift baskets to 10 key clients.
A business owner deducts $500 in gift cards given to family members as business gifts.
Key Takeaway: The difference between a valid deduction and a denied one usually comes down to documentation, usage percentage, and proper structuring. The same expense can be fully deductible, partially deductible, or not deductible at all — depending on how it is handled.
$25 per person per year under IRC §274(b). This limit applies regardless of the actual cost of the gift.
Yes -- up to $25 per recipient per year. Gift cards above $25 are not deductible for the excess.
