The IRS makes an exception for small gifts that list your company`s information and are distributed regularly. Classic examples include pens with your company name, buttons with your company logo, or custom notebooks that list your business contact information. Basically, anything that works as a virtual business card and costs less than $4 (excluding utilities) can be written off. While it`s tempting to go for the easy way and flood your customer with gifts, it`s probably not the smartest way to use your money for tax purposes. Instead, put your energy into building long-term relationships with your customers and invest your resources to make your services invaluable to your customers (with or without Moose Munch popcorn). Whether in the form of cash, gift cards or a token of appreciation, donations have tax implications that small business owners should consider. Gifts to employees. Although employee donations have their own limitations and can be treated as taxable compensation, an employer is generally allowed to deduct the full cost of donations to employees. Mary owns an accounting company, her husband Chris is an independent architect. Chris designs a building for a marketing company called High Class Ads LLC. Mary does the accounting for High Class Ads. Over the holidays, Chris and Mary both send $25 in gifts to high-class commercials to thank them for their business.
However, since Chris and Mary are legally married, they are counted as a taxpayer for the purposes of this depreciation and can only spend $25 between them (let the stone and paper scissors begin!). The main problem is that until the IRS changes the $25 deductible, people will waste money on “gifts.” A: It`s common for companies to end the year on a high note by giving gifts to their employees and customers, showing appreciation, and spreading a bit of holiday spirit. As tax season approaches, you may find that your Christmas presents open up a new possibility for tax depreciation. Below, we`ll present some examples of how tax-deductible Christmas gifts work. If you and your spouse both give gifts, you will both be treated as one taxpayer. It doesn`t matter if you have separate businesses, if you are employed separately, or if each of you has an independent relationship with the recipient. If a partnership makes donations, the partnership and the partners are treated as a single taxpayer. Find something your customers will love forever and use it day in and day out.
Then let it be tastefully provided with your information. Gifts to employees. Distributing tangible gifts to encourage the goodwill of your employees during the holiday season can be considered a marginal benefit of minimus, when the gift is too small to make billing reasonable or convenient. Minimus benefits are tax deductible and many businesses use an informal limit of $75 per donation. Common examples of these gifts include Christmas ham, turkeys, or gift baskets. The same strategy is often used in the world of work. Building and maintaining a strong customer base is the biggest problem for any entrepreneur, and making gifts to customers is an effective way to secure business (what idiot leaves the person who sends them Moose Munch popcorn every Christmas??). Another factor is that even if you give a potential customer or potential customer a mini basketball, charger, cup holder, etc., if these items have your company name, each cost less than $4, and are one of the many identical items, they will be treated as advertising expenses. Therefore, you can fully deduct the cost of these items and not have to keep receipts. On the other hand, if you offer someone pre-packaged food, flowers, game day tickets or chocolates, this would be considered a business gift and is subject to the limit of $25 or less.
The answer is: don`t give them a “gift”, give them a brand image. By offering the customer something that is constantly provided with your information, your gift is no longer a gift. It is the promotion or advertising that is 100% deductible regardless of the price. Giving a gift to an employee is in some ways more complicated than giving it to a customer. Indeed, you must not only ask the question “Can I deduct this gift?”, but also “Does my employee have to pay taxes on this gift?” Below, I`m going to share everything you need to know about the deduction of donations, as well as the rules that may have changed due to the Tax Cuts and Employment Act. While the Tax Cuts and Jobs Act (TCJA) has reduced some deductions related to business-related meals and entertainment, holiday celebrations are still a tax-deductible expense. If your Holiday celebration primarily benefits employees and high-paid families, the holiday is considered fully deductible and excluded from the recipients` income. Other companies such as brokers and mortgage lenders are LIKELY to give a customer gift (also known as a closing gift) and have therefore issued it by the hundreds. Unfortunately, they often give without any real knowledge of how much they are allowed to deduct per gift or how their CPA categorizes the gift or if they do it well. Also consider going the extra mile to mark it with the customer`s information. .