It’s almost the end of the year and with the holidays coming up quickly, I’m sure everybody has already finished all of their holiday shopping (or you have been focusing on year-end work, in which case you probably left it all until the last possible minute, like so many of us do). One thing to take into consideration as you get into the spirit of giving is that the amount you spend on gifts in the workplace might just be deductible on your taxes!
The IRS has a few specific rules and regulations concerning the deductibility of money spent on gifts. The general rule for most purposes it that you can deduct up to $25 per gift for gifts given during the tax year. This includes whether the gift is a direct gift to a customer or an employee, or whether the gift is an indirect gift, such as a gift to a customer’s family members.
Another rule to note is costs that are classified as incidental costs are generally not included in calculating the cost of the gift, as they usually do not add significant value to the gift. Incidental costs include costs such as packaging, mailing, engraving, etc. Also, items that cost less than $4 and are mass-produced and have your company name imprinted on them (such as pens and other marketing materials) are not considered gifts for tax purposes and are not counted toward your $25 deduction limit.
If you are looking for more information on gift deductions, you can read a more detailed account on the IRS’s webpage via the link below.
Happy holidays and if you’re planning on deducting this year’s gifts on your taxes, remember to keep your receipts!