Are Gifts to Business Clients Deductible?

Business gift expense deductions are very limited—$25 per person per year.

By , J.D. USC Gould School of Law
Updated 2/02/2022

A common practice among certain types of business professionals is to provide a gift when a deal closes or a transaction is completed. For example, a real estate agent might give a client who buys a house a $100 gift card from a home improvement chain or a $100 bottle of wine. The agent attaches a note with the gift asking for future business and referrals accompanied by three business cards.

Are gifts like these tax-deductible business expenses? Yes, but they are subject to draconian limits.

Gift Expense Deduction Limit

If you give someone a gift for business purposes, your business expense deduction is limited to $25 per person per year. Any amount over the $25 limit isn't deductible. If this amount seems awfully low, that's because it was established in 1954.

A gift to a member of a client's family is treated as a gift to the client unless you have a legitimate nonbusiness connection to the family member. If you and your spouse both give gifts, you're treated as one taxpayer—it doesn't matter if you work together or have separate businesses.

Who Does the Limit Apply To?

The $25 limit applies only to gifts to individuals. It doesn't apply if you give a gift to an entire company unless the gift is intended for a particular person or group of people within the company. Such company-wide gifts are deductible in any amount, as long as they're reasonable.

Example. Bailey is a commercial real estate broker whose best client is Acme, Inc. Just before Christmas, he drops off a $100 cheese basket at the company's reception area for all of Acme's employees. He also delivers an identical basket to Acme's president. The first basket left in the reception area is a company-wide gift, not subject to the $25 limit. The basket for Acme's president is a personal gift and therefore is subject to the limit.

Learn More

To learn more about making the most of your business deductions, get Nolo's Deduct It! by Stephen Fishman, J.D.

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