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Tax and Accounting Blog: Finding the Signal in the Noise

The (Tax) Benefits of Gifting

Posted by Ruchi Attal Posted on Nov 22 2019

They say it is better to give than receive. I agree – especially when that giving can lead to some tax breaks!! Did you know that some holiday gifts you give to employees, business partners, and clients may provide you with tax benefits?

I like giving gifts to my employees during the holiday season (Apex team – hope you are reading this!). If an employer offers gifts once a year (like at Christmas), the gift’s value would be treated as a “de minimis fringe” benefit. What does that mean exactly? The gift would be tax-free to the employee and tax-deductible by the employer. Win – win!  

Note: cash gifts, regardless of the amount, are considered additional wages and would be subject to the usual taxes. 

The holidays are the perfect time to give a gift to your clients to 1) show your appreciation and 2) get a tax deduction at the same time. In the spirit of giving, the IRS allows businesses to deduct gift expenses up to $25 per client per year. 

Also, in a world where emails and texts are the most frequent form of communication, there are many businesses that still send their clients holiday cards each year. Not a bad idea since holiday cards are considered stationary, which falls under business expenses. By the way, the postage to mail them is also a business expense!

The holidays are a great time to reach out to clients and employees and let them know how much you appreciate them. And believe it or not, our tax code actually encourages giving by providing some helpful tax breaks. So spread the cheer and enjoy the holidays.

All thoughts and opinions shared here are for informational purposes and should not be taken as personalized tax or accounting advice. Every situation and circumstance should be analyzed independently by you and your CPA.