TAX DEDUCTIBLE EXPENSES MANUAL

Although employee gifts have their own limitations and may be treated as taxable compensation, an employer is generally allowed to deduct the full cost of gifts made to employees. For example, the costs of custom engraving on jewelry or of packing, insuring and mailing a gift are deductible over and above the $25 limit for the gift itself. If you have a business connection with both spouses and the gift is for both of them, the $25 limit doubles to $50.

TAX DEDUCTIBLE EXPENSES MANUAL

For example, a gift of a $200 reference manual to a company for its employees to use while doing their jobs would be fully deductible because it’s used in the company’s business. Gifts given to a company for use in the business aren’t subject to the limit. The $25 limit applies only to gifts directly or indirectly given to an individual.

Here’s a quick rundown of the major exceptions to the $25 limit: Fifty-five years later, the $25 limit is unrealistically small in many business gift-giving situations. Unfortunately, the tax rules limit the deduction for business gifts to $25 per person per year, a limitation that has remained the same since it was added into law back in 1962. Getting around the $25 deduction limit for business giftsĪt this time of year, it’s common for businesses to make thank-you gifts to customers, clients, employees and other business entities and associates.

Tax deductible expenses