Business-gift expenses in the US?

2018-04-20 20:23:35

In the USA-IRS milieu,

Consider these two examples: we'll say contractor Sally in Chicago is a chip designer...

So in the new tax year 2018 under whatever rules apply in 2018,

Sally flies to Japan to see a large client. Sally purchases $50 of chocolates to take and distribute to the team (say, 5 people), since they like US chocolate.

Sally has a large client in California. At Xmas she sends the three principals each a $100- bottle of liquor. It is 120- each including Fedex.

In both cases they are completely real clients, each spending six figures to Sally during the business year.

What's the deal on this in the US ... is it a deductible expense?

(I've noticed around the world, different national authorities see "business-gifts" as either a disallowed complete scam, or totally normal. What's the US situation?)

Strictly speaking, business gifts are limited to a deduction of $25 per person per year, though shipping can be tacked on top of that. So,

$50 in

  • Strictly speaking, business gifts are limited to a deduction of $25 per person per year, though shipping can be tacked on top of that. So,

    $50 in chocolates for a team would be $10 per person - fully deductible.

    $100 bottle plus $20 shipping each would be $25+20 = $45 deductible each per person.

    Note that #1 is a little more gray in that it isn't necessarily for a particular person. It could probably have been a business to business gift, in which case the amount isn't capped at $25 per person. But if you provided cakes for the entire company you're crossing the line into "meals and entertainment" which prior to this year would have been deductible at 50%, but now after the tax law changes most signs point to interpreting it as no more meals and entertainment deductions at all.

    2018-04-20 20:41:47
  • See chapter 11 of the IRS Publication 535, Business Expenses, especially the sections "Meals and Entertainment", and "Bribes and kickbacks"

    2018-04-20 21:36:57