If you’re in a business similar to mine where you have long-lasting client relationships or high ticket offers (courses, coaching, etc), you might want to think about gifting to your clients as appreciation for signing on with you, or as you close out an engagement. Of course, there’s always holiday gifting too. However, before you start shopping for presents to show your appreciation to clients, employees, or vendors, it's important to understand the IRS rules and requirements surrounding business gifting. In this blog post, we'll explore the dos and don'ts of business gifting and provide examples of what you can deduct and what you can't.
A business gift refers to any item given to clients, employees, vendors, or business associates with the intention of promoting goodwill, strengthening relationships, or expressing gratitude. Common examples of business gifts include personalized merchandise, gift baskets, tickets to events, and even holiday hampers.
The IRS allows businesses to deduct certain expenses related to business gifts, subject to specific limitations. To be deductible, a business gift must meet the following criteria:
While it's essential to express gratitude, not all business gifts are deductible. Before we get into non-deductible examples, one thing I like to remind my clients of, is just because something isn’t deductible, doesn’t mean you can’t buy it through your business. That’s where accurate bookkeeping comes into play, and categorizing things appropriately. If you know something isn't’ deductible, create a separate category in the chart of accounts, called “Entertainment” so your tax pro can easily pull those items out.
The following examples are generally considered non-deductible:
To substantiate your business gift expenses and potential deductions, it is crucial to maintain accurate records. This is something your bookkeeper should be able to help you with. Keep track of the following information—this can be done in the in your accounting system to make it super easy for keeping everything in one place :
Business gifting is a thoughtful gesture that can foster stronger relationships and goodwill. Understanding the IRS rules and requirements is crucial to ensure you maximize deductibility while staying compliant. Remember, deductible business gifts must be ordinary, necessary, and within the $25 per-recipient limit. By keeping proper records and adhering to these guidelines, you can show your appreciation while managing your business's tax obligations effectively.
Here’s a list of our go-to gifting vendors. If you have some you really like, comment below to share!
We send Linden Square customized and branded gift boxes to all of our new recurring clients and our VIP Group & Private Coaching Clients. These are a beautiful touch and the company will work with you to create something custom and memorable with your branding!
We like greetabl for small thank you gifts for podcast guests or small tokens of appreciation (like when a client refers us another client—we’ll send one of these in addition to a referral fee!)
Of Course if you’re good at curating your own gifts, shopping local is always a great option if you have the time!
This article is for informational purposes only and should not be construed as legal or tax advice. Please consult with a qualified tax professional for advice specific to your situation.
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