Thank-you gifts are a great way to show gratitude and appreciation for your clients. The cost of business gifts is also tax deductible; the IRS permits a maximum deduction of $25 on gift costs per client.
The way to maximize the cost of gifts as a tax deduction is to spend less than, or as close as possible to, $25 on gifts per client, per tax year. But it's not easy to find meaningful gifts at such a low price.
To help, we compiled a list of client gifts that cost $50 or less. You can avoid the holiday retail rush by ordering any of these gifts online.
We've also included instructions on how to claim client gift costs as a tax deduction at the end of this article.
Happy holidays, and happy gifting!
Unique Client Gifts That Cost $50 or Less
Postcardens are pop-up postcards that flourish into miniature gardens. This is a unique, inexpensive way to send a thank you note that will stay in your client's mind (and on their desk) long after the holiday season is over.
If you're feeling ambitious, you could also send custom designed holiday cards to your clients. Minted.com has a selection of template designs which you can customize and order through their site. View their selection of business holiday cards for inspiration.
Delicious Coffee: $19 - $40
People who drink coffee tend to be obsessed with the stuff. For your coffee-loving clients, Kindly Coffee offers a 2-month subscription of organic coffee for $40. MistoBox allows you to gift a selection of coffee for $19, and their service allows you to elect if you or the recipient will choose the coffee they receive.
ClubW Wine Delivery: $50
ClubW is a wine subscription service that allows you to send a gift certificate for $50, which the recipient client can use to redeem for a wine of their choosing. They also offer a ‘corporate gifts’ service that allows you to send gifts to your clients that are branded with your company logo.
Birchbox's Home Sweet Homespun Gift Box: $40
It seems that there's a subscription box for every niche interest these days, and most services will allow you to send a single delivery as a gift.
Birchbox, a popular subscription and gift box service, has plenty of holiday box options that make for great one-time gifts. Their Home Sweet Homespun box is full of holiday comforts and retails for $40.
For additional options, browse SubscriptionBoxes.com.
Kiva Card: $25
Kiva gives you the chance to make a loan to people in over 70 countries so they can start businesses, go to school, and change their lives.
Gift a Kiva Card to your client and they'll be able to use it to support a borrower of their choice on Kiva.org.
(full disclosure: we're huge fans of Kiva here at Bench. Check out our Kiva Team Page here.)
If you’d prefer to donate to a charity or food bank on behalf of your clients, use Charity Navigator to find organizations in your local area.
Gift Cards: $5 and Up
Gift cards aren't the most unique of thank you gifts, but if you've left your shopping to the last minute then gift cards are by far the easiest to buy and mail out to clients.
How to Deduct the Cost of Client Gifts
Now that you have a few ideas about what to buy your clients, let’s look at how you can claim the cost of client gifts as a tax deduction.
Dollar Limit: Note that you can deduct no more than $25 for business gifts you give directly or indirectly to each person during your tax year. Additionally, if you purchase a gift for a customer’s family member, it will also count as part of that same $25 limit. Similarly, if you and your spouse both give gifts to the same customer, you are treated as a single taxpayer and your combined purchases are subject to the $25 limit.
Incidentals: Incidental costs are not subject to the gift limit. Examples of incidental costs include packaging, insuring, shipping, and engraving the gift. As long as they don’t add any substantial value to the gift, you can deduct the entire cost of incidentals as a business expense. For example, if you send a client a gift that costs $50 and you pay $10 to ship it, you’ll be able to deduct $25 for the cost of the gift, and the $10 shipping charge is a business expense.
Gift vs. Promo Item: There’s a difference between a gift and a business promo item. Products that cost $4 or less to produce, that display your business name and information, and that are one of many identical items you plan to distribute, are not considered gifts. The cost to produce a run of holiday cards, for instance, would be deductible as a promotional expense, and therefore not subject to the gift limit.
Charitable Contributions: You can deduct charitable contributions made to qualified organizations. Sole proprietorships, single member LLCs, and partnerships all deduct these costs on their personal tax return, while corporations deduct them on their corporate tax return.
Do you have any questions about the client gift tax deduction? And what thank you gifts will you be sending your clients this year? Share them with us in the comments section below.
This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor or tax advisor with respect to matters referenced in this post. Bench assumes no liability for actions taken in reliance upon the information contained herein.