Crystal Fox Bookkeeping LLC

Who is planning to buy gifts for their clients this holiday season?! 🎄🎁 😍
 
If so, awesome! Client gift giving can enhance your client relationships, and generate more leads and referrals (whoop whoop!) 🙌
 
However, no matter how good the gift is … you still gotta track those gift purchases in your financial records … and your upcoming 2022 taxes! 😬
 
Here's what you need to know about your client gifts, how tax deductible they are, and how to track them in your financial software!
 
(𝟭) 𝗪𝗵𝗮𝘁 𝗖𝗼𝘂𝗻𝘁𝘀 𝗔𝘀 𝗔 𝗧𝗮𝘅 𝗗𝗲𝗱𝘂𝗰𝘁𝗶𝗯𝗹𝗲 𝗖𝗹𝗶𝗲𝗻𝘁 𝗚𝗶𝗳𝘁 𝗶𝗻 𝟮𝟬𝟮𝟮?
 
It depends what you buy and how much it costs…
 
Back in 1962, the IRS set the tax-deductible limit for client gifts at just $25!!! 𝘛𝘩𝘪𝘴 𝘮𝘦𝘢𝘯𝘴 𝘵𝘩𝘢𝘵 𝘰𝘯𝘭𝘺 𝘵𝘩𝘦 𝘧𝘪𝘳𝘴𝘵 $25 𝘰𝘧 𝘺𝘰𝘶𝘳 𝘤𝘭𝘪𝘦𝘯𝘵 𝘨𝘪𝘧𝘵 𝘪𝘴 𝘵𝘢𝘹 𝘥𝘦𝘥𝘶𝘤𝘵𝘪𝘣𝘭𝘦.
 
And, in 2018, the IRS also decided that “entertainment” expenses were no longer tax deductible. So that means 𝘺𝘰𝘶'𝘳𝘦 𝘱𝘳𝘰𝘣𝘢𝘣𝘭𝘺 𝘣𝘦𝘵𝘵𝘦𝘳 𝘰𝘧𝘧 𝘴𝘵𝘪𝘤𝘬𝘪𝘯𝘨 𝘵𝘰 𝘱𝘳𝘰𝘥𝘶𝘤𝘵 𝘨𝘪𝘧𝘵𝘴.
 
(𝟮) 𝗛𝗼𝘄 𝗧𝗼 𝗧𝗿𝗮𝗰𝗸 𝗗𝗲𝗱𝘂𝗰𝘁𝗶𝗯𝗹𝗲 𝗩𝘀. 𝗡𝗼𝗻-𝗗𝗲𝗱𝘂𝗰𝘁𝗶𝗯𝗹𝗲 𝗔𝗺𝗼𝘂𝗻𝘁𝘀 𝗶𝗻 𝗤𝘂𝗶𝗰𝗸𝗯𝗼𝗼𝗸𝘀
 
If you buy a $30 gift basket for a client, $25 of that is tax deductible …buuuut $5 isn’t 😑
 
To solve this, set up 2 different expense accounts for “client gift”, one deductible and one non-deductible, and split out the gift costs between the two accounts!
 
(BTW, I know a single post can't cover it all, so I also included a helpful link below! 👇)
 

Comment below and share!… what gift are you MOST excited to give someone this year?!