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.

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.)