Business Gift Deductions: What You Should Know
Posted by Bradley Bach on November 10, 2025
Giving thoughtful gifts to clients or employees can strengthen relationships — and sometimes offer tax advantages. However, the IRS generally limits deductions for business gifts to $25 per recipient per year, a threshold that’s been in place since 1962. With smart planning and accurate records, you can still make the most of this deduction.
When the $25 Limit Doesn’t Apply
Certain situations allow you to deduct more than the standard cap:
- Gifts to Companies
- The $25 rule applies only to gifts for individuals. Items provided to a business for its use — such as office tools or reference materials — are typically fully deductible. If the gift mainly benefits a specific person, the $25 limit kicks in.
- Gifts for Couples
- If both spouses have a business relationship with you and the gift is intended for both, the limit usually doubles to $50.
- Incidental Costs
- Expenses for personalization, packaging, shipping, or insurance don’t count toward the $25 cap and are fully deductible.
- Employee Gifts
- Cash or gift cards: Treated as taxable wages and deductible as compensation.
- Noncash, low-value items: Examples include branded merchandise, small holiday gifts, or occasional meals. These may qualify as tax-free “de minimis” fringe benefits and are deductible by the business.
Entertainment Gifts After Tax Reform
The Tax Cuts and Jobs Act eliminated most deductions for entertainment, including sports or concert tickets. If you give tickets as a gift and don’t attend, the cost may qualify as a business gift (subject to the $25 rule and exceptions).
Meals during such events can still be 50% deductible if listed separately on the invoice.
Why Documentation Matters
To claim deductions, keep detailed records:
- Description and cost of the gift
- Date and business purpose
- Recipient’s relationship to your business
Digital records (accounting systems, CRM notes) are acceptable if they clearly support the deduction. Track qualifying expenses separately for easy identification.
Make Your Gifts Count
With a little planning, you can give meaningful gifts and stay tax compliant. If you’d like help reviewing your company’s gift policy or confirming how these rules apply to your situation, reach out to our office. We’ll ensure your approach is both generous and tax smart.
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Bradley joined the Firm with thirteen years of experience in both public and private accounting. As a principal in the Firm's tax department, Brad's primary focus is in the construction industry and in real estate partnerships and transactions. He also provides tax planning and compliance for high-wealth individuals.