Tax Preparation: Tax Deductions on Business Gifts

When it comes to being a professional or owning a business, there are many circumstances that warrant gift giving. This also applies to clergymen. As a result, the IRS allows business owners including clergymen the ability to deduct expenses for small gratuities and gifts. Gifts given in a professional capacity are often given in order to build goodwill between a business or leader and clients, prospects, congregation, vendors, or employees.

When it comes to determining tax deductibility for these gifts, the IRS publications 535 and 463 outline the rules and guidelines but in general the dollar value of a gift that qualifies for deductions is usually limited to $25.

Employee Gifts

Small gifts can be given to employees and written off as non-wage expenses. Small employee gifts often consist of holiday treats, food items, or gift baskets. Food and dining business expenses are usually only 50 percent deductible, therefore as tax preparation time draws near classifying these items as an employee gift allows for full deductions. 

Clients, Customers and Vendors

When it comes to other people that you deal with in business that are not in an employer-employee capacity are eligible for gift deductions as well. You are allowed to deduct gifts up to $25 per person per year for these types of gifts. Gifts with business names and logos with a value of $4 or less should not be placed in this category and should instead be counted as a marketing expense which is fully deductible. This also applies to clergy taxes. For advice and specifications in regards to differences in deductions speak with at tax preparation professional.


If you’re stuck and can’t think of any ideas for business gifts you may want to consider meaningful or useful items that cost $25 or less including gift certificates, gift baskets, candy, wine, a holiday meal, books, artwork, etc.


It’s also important to differentiate classifying items between gifts and entertainment. For example, if you gift a customer with a ticket to a show and go with him to the show it’s considered entertainment and is therefore only 50 percent deductible. You can actually deduct 100 percent if you don’t go as it is considered a gift in this situation.

To receive a full explanation of business gifts eligible for tax deductions make sure to speak with a tax services professional.

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Sarah Wozniak

Staff Writer, Page1 Online Marketing