No, gift cards and gift certificates don't count as a tax-deductible expense, even if you give them to a customer. In addition, any cash (or cash equivalents) counts as taxable income for the beneficiary. That makes them the main exception to the general rule of going to the store we talked about earlier. You can help your account manager by keeping detailed notes (such as what you bought, who you bought it for, and why you bought it) about the gifts you buy for your customers.
If a gift can be a gift or entertainment, it will most likely be considered entertainment, which is not deductible. While some of the examples in this case seem a little extreme (at least to me), they demonstrate how companies claiming gifts as deductible expenses should have evidence to support the reasonableness of the donation and provide a clear audit trail of business purpose. Whether it's a way to say thank you or happy holidays, there are important considerations to consider before handing out gifts. Giving gifts to customers or customers can be a great way to build goodwill, build customer loyalty, and differentiate yourself from the competition.
If your donation involves a meal at a restaurant, it may be subject to rules regarding meals and entertainment expenses. Gifts that are specific to meals or entertainment, such as gift certificates for a restaurant or tickets to a sporting event, even if you are not accompanying the customer, are only 50% deductible and should be reflected as meals and entertainment in your accounts. These gifts are minimal and may include Christmas gifts, fruit baskets, tickets to occasional events, flowers, fruits, etc. There are also times when gifts to employees are so minimal that they will not be taxable for the employee and are considered de minimis add-on benefits.
If the gift is not taxable for the employee, the gift must be reasonable in order to deduct it as a business expense. RESPA also prohibits real estate agents from receiving gifts or compensation in exchange for referring businesses to affiliated companies. The amount of the donation must be reasonable and proportional to the nature of the business relationship. With tax season just around the corner, you may find that your business gifts during the holidays open up a new opportunity for tax cancellation.
We'll be happy to discuss your goals, how donations can fit into your tax strategy this year, as well as time-saving applications to integrate them into your business. If you choose to give cash, gift cards, or similar items as a holiday gift to employees, the value would be considered additional salary or salary and would be taxable. Before you start ordering gifts for special occasions, thank you, or Christmas, make sure you fully understand how the gift will affect the company and your employees' taxes.
