TIP #9: Give Gifts at Discount Prices

As the holidays approach, many businesses give gift baskets and other trinkets away to clients and prospects to say thank you or to help drum up more business. What can you give away in your business?

The $25 Limit
As a business you can deduct 100% of gifts given to business associates. The catch is that it caps out at $25 per person each year. So if you give John, a new client, a Christmas gift that cost you $100 then you can only deduct $25. That is a very low limit.

Two Ways Around the Limit
So what can you do if you have a client who is very important or to whom you want to do something special above the $25 limit and still get a good deduction?

Give the gift to an organization rather than an individual! Rather than give a gift to the VP of marketing at XYZ Company. Give the gift to the entire Marketing Department. If you are not giving the gift to a specific individual then you can deduct 100% of the cost!

Give gifts of entertainment in place of physical gifts. If you take a client out to a show or to a sporting event then you write it off as entertainment rather than as a gift. Just make sure you follow the rules for entertaining outlined in the entertainment chapter.

If you are in an industry such as real estate or insurance that limits gifts make sure you comply with all state and federal laws.