.Business Gift Giving - Increasing the
Keep Good Records
Uncle Sam can be
stingy when it comes to business gifts. In general, you can
only write off up to $25 per person per year. But thereís a
tax-wise maneuver that can increase your deduction if you want
to be more generous.
Simply give tickets to the theater or a sporting
event. Under the tax law, you can treat gifts as either an
entertainment expense or a business gift. Keep in mind,
however, that you can only write off 50 percent of
entertainment expenses. But with the cost of tickets these
days, itís possible to come out ahead on your tax return and
give a special gift.
For example, letís say you want to thank a
favorite customer with two $75 tickets to a professional
basketball game. If you treat the tickets as a business gift,
you can only deduct $25 of the $150 cost. But if you classify
the tickets as an entertainment expense, your deduction grows
to $75 ($150 reduced by the 50 percent
Remember to keep good records of business
gifts and entertainment expenses since the IRS is always on
the lookout for cheating in these areas.
Donít make the mistake of thinking you can get around the $25
business gift limit by calling the outlay something else. In
one case, an S corporation gave $210 gift certificates to
customers and deducted the full amount as an "advertising"
expense. The Tax Court agreed with IRS auditors who only
allowed a write-off of $25 per recipient (Ronald and Sue M.
Leschke, TC Memo 2001-18).