The holidays are right around the corner, and if you’re anything like most small business owners, you’re probably already planning your holiday cards, client gifts, or team surprises.

But here’s the question I get all the time this time of year:

“Can I write off client gifts for my business?”

The short answer: Yes – but only up to $25 per person per year.

Quick note: This article is for general educational purposes and is not intended as tax or legal advice. Always consult with your accountant or tax preparer to confirm what applies to your specific business situation.

Let’s break that down and talk about how to keep gifting thoughtful, on-budget, and compliant with the IRS rules.

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1. The $25 Rule (and What It Really Means)

The IRS allows you to deduct up to $25 per person, per year for business gifts.
That means if you send a client or vendor a $50 gift basket, only $25 of that cost is deductible.

A few quick notes:

• That limit applies to each individual recipient, not each gift.
• If you send gifts to a client’s whole team, each person who directly benefits can be counted separately.
• Shipping and packaging don’t count toward that $25 limit (so your gift wrap and postage are fully deductible).

So yes, you can absolutely send your clients or partners a small gift – just keep that $25 number in mind when you’re planning your budget.

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2. What Doesn’t Count as a Deductible Gift

Not everything that feels like a gift qualifies as one in the eyes of the IRS.

Here are a few quick distinctions:

• Entertainment (like concert tickets, events, or meals) are usually not deductible as gifts anymore.
• Promotional items (like branded mugs, pens, or calendars) are generally deductible as marketing expenses – not as client gifts – since they advertise your business.

If your logo is permanently visible and the item costs under $4 each, it typically qualifies as a promotional expense instead.

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3. How to Handle Employee Gifts

Employee gifts are handled differently than client gifts, and you’ve got a bit more flexibility here.

Here’s how it breaks down:

• De minimis gifts (small, occasional items like coffee gift cards, treats, or holiday goodies) are deductible and not taxable to the employee.
• Cash or gift cards, however, are considered taxable income and must be reported on payroll.
• Larger gifts (like bonus trips or big-ticket items) generally need to go through payroll as taxable benefits.

👉 The key: keep employee gifts thoughtful but small, or go the bonus route and process it correctly.

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4. Tips for Affordable, Tax-Friendly Gifting

If you want to stay compliant and keep it classy, here are a few simple ideas that fit within the rules:

• Personalized thank-you notes with a local coffee shop gift card
• A custom holiday ornament or small candle
• Branded treats, notebooks, or pens under $4 each (marketing deduction!)
• For employees: small snack boxes or cozy winter gifts

The thought matters more than the price tag – and with the right planning, you can still make clients and team members feel valued without triggering an IRS headache.

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5. Keep Great Records

When it comes to deductions, documentation is everything.

Make sure you:
✅ Keep a list of who received gifts and what you sent
✅ Save receipts or order confirmations
✅ Note the business purpose (e.g., “Client appreciation gift”)

That way, you’re covered if the IRS ever asks, and you’ll thank yourself when tax season rolls around.

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Final Thoughts

Holiday gifting doesn’t have to be complicated or expensive.
With a little planning and record keeping, you can spread holiday cheer, stay within IRS guidelines, and keep your books looking clean and professional.

And if you’re unsure what’s deductible (or just want to double-check your gifting budget before year-end), that’s exactly what we’re here for.

🦃 We only have one onboarding spot left between Thanksgiving and Christmas!🎄

If you’ve been meaning to get your books caught up before the year ends, now’s the time to grab it before it’s gone.

👉 Book a call with Young Wealth Co.

Stick around, friend. Your next money breakthrough might just be one blog post away.

Hannah & The Young Wealth Co. Team