How To Receive a Full Tax Deduction for Business Gifting

How To Receive a Full Tax Deduction for Business Gifting

In my role as a CPA and Virtual CFO for small business owners, I am endlessly searching the internet for custom, unique gifts under the IRS threshold. You may be slightly panicking while reading this and thinking “Wait, what threshold?!” 

Not to worry because we’ve got your back. Greetabl is THE solution I’ve been looking for to provide those well-branded gifts for a reasonable price.

The low-down on the current IRS Threshold limits:

  • Client and business gifts must be under $25 per person to be fully tax deductible
  • Anything over $25 could be treated as taxable income to the employee or client
  • This does not include incidental costs such as engraving, packaging, shipping, or insuring

This limit could seem like a deal-breaker for many business owners who are working to cultivate a certain brand image. Twenty-five dollars doesn’t go very far these days!

This is where help comes in. Greetabl makes it easy to stay under the $25 limit while still delivering something beautiful and delightful. This means you will still get that full tax deduction because you are a savvy business owner and purchased gifts under the IRS threshold. You go, you!

In the past, I’ve used Greetabl to send a current client a “thank you” gift for their referral. To do this, I went to the Professional Shop and selected the Mod Minimalist Print. For my gift, I selected the Large Caramel Box from Shotwell Candy Co. Lastly, I branded the box with my business’s logo and a customized message.

Voila — a super professional gift for $21! My client RAVED about how delicious and addictive the candy was.

Grab that same gift HERE. Or, create your own Greetabl box to stay below the IRS threshold while sending a gift that is unique and well-branded. 

Here are the 7 Most Frequently Asked Questions (FAQs) that I get from my clients and colleagues about business gifts:

1. But what happens if I go over the $25 limit?

That’s totally OK! However, you can only deduct $25 of the cost of your gift per the IRS’s guidelines.

2. Is shipping included in that $25 limit?

Good news — shipping is not included in that limit. So, if your Greetabl gift is $25 PLUS shipping, you can deduct the full amount.

Greetabl wants to make client gifting work for you and your business. Click HERE to learn more about our Insider membership to get free shipping on every order!

3. What if I’m sending a gift to an entire business office, not an individual?

If you give a gift to a company that is intended for eventual personal use or use of a small group, that gift will be considered an indirect gift to that particular person or small group.

THE TLDR: if your gift is going to an office of 10 people to be shared, the gift threshold would be $250 ($25 * 10). However, if your gift gets taken home by one team member, your gifting threshold would be $25. Ouch!

4. What if I have business partners and the gift is from all of us?

Unfortunately, a partnership or spouse-duo acts as one unit and is still subject to the $25 threshold. 

Good news: Greetabl has gifts great for pairs. I recommend the Mini Copper Mugs (set of 2!) or the Large Box Caramels (great for sharing!).

5. Are clients AND employees subject to the same limitations?

No, employees can absolutely receive gifts over the $25 IRS threshold and you can take the full tax deduction. However, these gifts must be treated as taxable income to the employee and added to their W-2s with some exceptions. 

You may be thinking “Ugh, that sounds like more paperwork!”. Hence, the exception to the rule:

These exceptions are non-taxable gifts called “de minimis fringe benefits”. And, yes the tax code is legitimately written in Latin. Some examples are occasional flowers/candy or holiday gifts. These gifts are always non-cash and typically under $75.

The main thing that these “de minimis” gifts have in common is that they are occasional, as they do not occur at a regular frequency. So yes, your Greetabl gift to your employee could potentially be classified as a de minimis fringe benefit which means no payroll maneuvering required to take the deduction — YAY!

6. What type of records do I need to keep track of?

Your records should prove the business purpose of the gift and the details of the amount spent. I recommend retaining your receipt from Greetabl somewhere secure in the cloud for document retention purposes. This will make tax season a breeze! 

As a best practice, if you use an accounting software or retain a spreadsheet with your business expenses, you should create two separate categories:

  1. Business Gifts (Deductible Portion)
  2. Business Gifts (Non-Deductible Portion)

This will allow you to stay organized and make sure you maximize your deductions come tax time. Trust me — your CPA will LOVE you!

7. How do I learn more?

When in doubt, checkout the IRS website for more details and information. It’s a great resource, and surprisingly simple to understand!

Or — feel free to reach out directly to me (Gradient Accounting | [email protected]) for more specific advice and consultation.

In the online business world, it’s hard to overstate the importance of real-time touch points and physical tokens of appreciation. An email is great, but a hand-delivered package says so much more. 

Consider a unique, customized corporate gift through Greetabl to maximize your business deductions this tax year.

Kristin Meador is a Certified Public Accountant. While she’s not hiking in the Smoky Mountains or checking out new breweries (@travelingcpachick), she’s working on growing her own financial services firm.

Gradient Accounting provides Accounting, Tax, and Profit Planning services to help you KEEP more of your hard-earned money. If you’re a business owner looking for a financial partner check out to schedule a free consultation.