Giving Gifts and Lowering Taxes

Posted by Tax Tip on February 25, 2009, 2:20 am

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If you give gifts in the course of your business, you can deduct all
or part of the cost, but you cannot deduct more than $25 for each
business gift that you gave away during the tax year.

A gift that is intended for the eventual personal use or benefit of a
particular person or class of people will be considered a gift to that
person or class of people. If you give a gift to a member of a
customer's family, the gift is generally considered to be an indirect
gift to the customer. This rule does not apply if you have an
independent business connection with that family member and the gift
is not intended for the customer's eventual use.

Incidental costs, like gift wrapping, packaging, insuring, and
mailing, are generally not included in determining the cost of the
gift. You cannot deduct gift items that cost less than $4 if they have
your name clearly and permanently imprinted on the gift, or if the
gift is one of many identical items that you widely distribute, like
pens and cases. Signs, display racks, and other promotional materials
also cannot be deducted as gifts.

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