The 2023 Holiday Business Gifting Tips

The 2023 Holiday Business Gifting Tips

The season of giving is the ideal time of year to express gratitude to your customers and business partners. While it's a wonderful way to express gratitude and appreciation, it is prudent business to be sure you are taking full advantage of the potential tax breaks the IRS allows for business gifts.

Sadly, the IRS only permits a $25 deduction per person, per year, for client gifts made in the course of business. Why is the deduction inadequate? If the initial limit from 1962 had been adjusted for inflation, the deduction would be worth around $190 today! (Fisher CPA Firm)

The IRS $25 cap on corporate gifts applies to each individual you send a business gift to in a given year. There is no cap on the number of business gifts you can send or your gift-buying budget, but you are only allowed a $25 deduction for each recipient. However, you can maximize your deduction by giving to the company.

Take Full Advantage of the Tax Benefits of Business Gifting this Holiday Season

If you provide a substantial present to the entire firm and it isn't meant for use by a small group of people and not an individual, you can maximize your deduction. (Fisher CPA Firm) The gift must be something that you are confident the business will give to all of its employees. This is why it is crucial that you maintain a complete record of your gift expenditures, including if the gift was sent to a company or individual and how many recipients the gift is intended for.

For instance, a company in Chicago you have been working with has a small office of 30 employees, and you would like to express your appreciation to the entire company for all their hard work during the year this holiday season. You have selected a practical business gift, such as our Port Authority Daily Commute Backpack which can be purchased without a logo for $30 or with a logo for $35.

If you were to send 30 backpacks with your company logo to the Chicago company for their entire office, the cost would be $1050. You could deduct $750 ($25 * 30) as a gift expense. This means you have 30 happy individuals walking around downtown Chicago promoting your brand on their backpacks for only $300. That is the power of savvy business gifting!

Give Gifts to Your Clients 

personalized backpack

Give Gifts to Your Clients

Thoughtful business gifting increases client retention rates by building stronger client relationships. Give to the entire company, build more substantial business relationships, and maximize your taxable gift deduction this holiday season.

  • 300 denier polyester canvas
  • Spacious main compartment with organization panel
  • Dedicated padded laptop sleeve
  • Front zippered pocket
  • Side mesh pockets
  • Padded air mesh shoulder straps
  • Padded back panel
  • The luggage trolley passes through on the back. Perfect for travel. Laptop dimensions: 15"h x 12"w x 1"d; fits most 15" laptops Dimensions: 17.75"h x 11.5"w x 5"d

When spreading holiday cheer this year, keep the following in mind :

1. What Is a Business Gift?

The IRS defines a business gift as something you give away "in the course of your trade or business." Your company may qualify for a business gift tax deduction depending on the kind of gift and the recipient.

2. Cash, Gift Cards, and Tangible Gifts - What to Give?

Cash and gift cards are treated as income and therefore are ineligible for a business gift tax deduction.

3. What Are Incidental Costs in Regard to Business Gifts?

Incidental costs cannot be included in the $25 deduction. Costs are incidental if they do not add value to the gift, such as packaging, gift wrapping, engraving, or shipping costs.

4. Promotional Gifts Are They Business Gifts?

A product is deemed a promotional and marketing expense if its value is less than $4, your company's name is permanently imprinted on it, and it is one of a number of identical items you widely distribute. Promotional and marketing expenses have different tax deduction policies and are not considered business gifts. (IRS)

5. Why You Should Keep Track of Your Business Gifts?

Since the IRS closely monitors this sector, you should always keep records of business gift expenditures. Maintain a record of the date, the name of the company, the number of employees or business partners the gift is meant for, the amount of the gift, and the date to support your deduction. If you provide a substantial present to the entire firm and it isn't meant for use by a small group of people and not an individual, you can maximize your deduction of $25 per individual.

 

 

Disclaimer: Nothing in this post should be construed as legal, business, or tax advice; it is solely intended for informational purposes. Regarding your particular circumstances, please speak with your accountant or bookkeeper for more details. Please read the following IRS resources for details: Are business gifts deductible? and Publication 463, Travel, Entertainment, Gift, and Car Expenses

 


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