Business gift deductions?

Question

Hi. I'm a business owner and I know I can deduct business gifts I send to someone in the amount of $25.00 per person, per year. I also know I can deduct gifts to businesses.

If I ship the gift to the person or business, can I deduct shipping costs as well?

Answer 1

The "total" deductible bus. gift amount is $25 per person.

You would consider the "total" cost of the item when considering the deductibility of the item.

For example, an bus. gift cost $40 but is subject to sales tax and s/h making the final cost $50. The deductible amount would still be $25.

You may want to consult a local tax practitioner for tax planning.

Answer 2

Actually, incidental costs that do not add value to the gift (shipping, engraving, insurance, etc.) are NOT included when calculating the cost of a gift for the $25 business gift expense limitation. (Treasury Reg. 1.274-3(c))

So, yes, you can deduct the shipping costs.  However, you would not include them in the cost of the gift.  You would add them to any other shipping costs you might have had during the year.

Hope this helps!!