| Gifts to a business client, customer, or contact are deductible business expenses. However, the maximum deduction for gifts is $25 per year per recipient. Gifts that cost $4 or less, as well as promotional items, are not subject to the $25 limitation.
To be deductible, the following information about each business gift is to be kept on file and may be requested by an IRS agent in the event of an audit:
- Amount (the cost to the taxpayer),
- Time (the date of the gift),
- Description of the gift,
- The business reason for the gift,
- The nature of the business relationship with the recipient (name, title and other designation, sufficient to establish the business relationship to the taxpayer.)
Notes can be made on forms within most accounting programs and on employee provided expense reports. It is not necessary to record information that duplicates information on a receipt; however, notes should be prepared at or near the time of the expenditure.
Click on the News Quick Link below to go to the newsletter page of our website for an article titled How Do I: Substantiate business gifts to clients?
|
