Can you deduct client gifts on taxes?

Yes — in the U.S., you can generally deduct the cost of business gifts given to clients, but the IRS limits the deduction to $25 per recipient per tax year.

Key points

• The $25 limit is per person per tax year, not a lifetime limit.
• If you give a client a gift worth more than $25, only up to $25 of the gift’s cost is generally deductible.
• Incidental costs like wrapping, engraving, packaging, or mailing may be deductible separately if they don’t add substantial value to the gift.
• Promotional items that are widely distributed and cost $4 or less and have your business name permanently imprinted may fall under a separate rule.
• Gifts for group use (for example, a basket for an office) may be treated differently if they are not meant for a specific individual.

Records to keep

Keep records of:

• the cost of the gift
• the date given
• what the gift was
• the business reason
• the recipient’s name and business relationship

Important caveat

This is based on U.S. federal tax rules. State rules can differ, and tax law can change, so it’s a good idea to confirm the current rules with an accountant or the IRS before filing.