Client holiday gifts and the $25 tax limit

You can deduct up to $25 for business gifts to each client per tax year, according to IRS Publication 463. Costs like packaging and mailing generally don't count toward that $25, and items costing $4 or less with your name clearly and permanently imprinted, one of many identical items you hand out widely, don't count as gifts.

The $25 limit per client

The IRS limits the deduction for business gifts to $25 for each person you give to directly or indirectly during your tax year. A gift sent to a company but meant for a particular person or a small group there counts as a gift to them. If you give a client a $60 gift basket, we read the rule as letting you deduct $25 of it.

Costs that don't count toward the $25

Incidental costs, such as engraving on jewelry, packaging, insuring and mailing, generally aren't included in the $25. The IRS counts a cost as incidental only if it doesn't add substantial value to the gift.

Items outside the limit

Publication 463 lists two kinds of items that aren't treated as gifts for the $25 limit.

• An item that costs $4 or less, has your name clearly and permanently imprinted on it, and is one of a number of identical items you hand out widely.
• Signs, display racks or other promotional material to be used on the client's business premises.

Records to keep

For each gift, the IRS's record table lists the cost, the date and a description of the gift. You don't always have to record each recipient's name; a general listing of recipients is enough when it is clear you aren't trying to avoid the $25 limit. We'd keep the receipts for cards, printing and postage in the same place.

This is a summary of the IRS publication for the 2025 tax year, not tax advice. We'll update this page when the 2026 edition is out. Ask your accountant how it applies to your business.

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