How To Get Maximum Deduction On
Using trade dollars to secure
business gifts certainly makes sense. After all, they build goodwill
and valuable name recognition, which ultimately converts into
increased sales. These gifts are tax-deductible too, so long as
they�re business related.
There is one catch however � the
deduction for gifts is limited to $25 per year, for each recipient.
Anything above that amount may not be deducted.
Is It A Gift,
Entertainment, Compensation, Or Advertising?
Twenty-five dollars doesn�t go
very far these days, so the key to obtaining maximum deductions for
business gifts is to choose, whenever practical, another category
for the gift.
When possible expense your gifts
as �entertainment� or �advertising,� since these categories have no
ceiling for legitimate deductions. Many giveaways legally fall into
the advertising category. Such items include door prizes, handout
and direct mail samples, awards for subscription sales, uniforms for
a baseball team, and contest prizes.
If prizes or awards are given to
employees, however, they usually would be tax-deductible as
�compensation� expenses. And employee bonuses are almost uniformly
considered to be compensation, regardless of whether they are
incentive or seasonal.
(For more specific information on
this topic consult with your CPA.)