If you give gifts in the course of your trade or business, you can deduct all or part of the cost. You can deduct no more than $25 for business gifts you give directly or indirectly to each person during your tax year. Incidental costs, such as engraving on jewelry, or packaging, insuring, and mailing, are generally not included in determining the cost of a gift for purposes of the $25 limit. Example. Bob Jones sells products to ABC Company. He gave ABC Company three gourmet gift baskets to thank them for their business. He paid $80 for each gift basket, or $240 total. Three of Local Company's executives took the gift baskets home for their families' use. Bob can deduct a total of $75 ($25 limit × 3) for the gift baskets.
U.S. Department of the Treasury. Internal Revenue Service. (2016) Publication 463: Travel, Entertainment, Gift, and Car Expenses (Cat. No. 11081L).
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