Maxine Aaronson, Attorney at Law
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Tax Newsletter

  • Income Tax Dischargeability
    Government income taxes may or not be dischargeable under a Chapter 7 (liquidation) bankruptcy. Income taxes are usually considered “priority unsecured debts,” and have a higher need to be paid over other unsecured debts... Read more.
  • Self-Employment Tax Requirements and Partnerships
    The Internal Revenue Service generally requires self-employed individuals to pay self-employment taxes. How does this self-employment tax requirement apply to partnerships? Generally, if you are a partner, your proportionate... Read more.
  • Chapter 7 and 11 Bankruptcy of Employers and Employee Benefits
    Generally, a business that is facing serious financial difficulties might seek to file for bankruptcy under either Chapter 7 or Chapter 11 of the U.S. Bankruptcy Code. Chapter 7 bankruptcy is more severe, as it involves a liquidation of... Read more.
  • Recent Changes in Federal Estate Taxes
    Much to the relief of many, the American Taxpayer Relief Act of 2012 (“2012 Tax Act”) was enacted in the beginning of 2013, making permanent many of the tax benefits that were scheduled to expire at the end of 2012. The... Read more.
Tax News Links

Can You Deduct Expenses Related to Gifts?

If you give business gifts either directly or indirectly to clients or potential clients, you may be able to deduct some or all of the cost of the gifts.

Business gifts that may typically be characterized as entertainment expenses would be subject to the 50% limit on food and beverage (meals) and entertainment expenses. In some instances, you may choose whether to deduct the cost of the gift as a gift expense or as an entertainment expense. For example, if your gift is meant to be used at a later date (such as packaged food or beverages), it should be deducted as a gift expense.

$25 Limit

Generally, you may deduct no more than $25 for business gifts that you give directly or indirectly to any one person during the year. Incidental costs, such as engraving or gift-wrapping, are not included in determining the cost of a gift. Additionally, circumventing the $25 limit by giving separate gifts to family members is not allowed.

Exceptions

Certain items are not included in the $25 limit for business gifts, including:

  • Gifts that are less than $4 that have your name permanently imprinted on them and are widely distributed (pens, pads of paper, bags, desk sets)
  • Promotional items (signs, display racks) to be used on the business premises of the recipient

For example, if you spent $25 on a business gift, included a $4 pen engraved with your business identity, and spent another $4 wrapping the gift, you may take a total deduction in the amount of $29.