Corporate Gift Taxes & Limits: Everything You Need To Know
Corporate gifts are a great way to celebrate your business’ success with the people who have been the most heavily involved, and those you want to thank. With one single item or present, you can make a lasting impression on your clients and employees that shows your company’s appreciation. It’s an effective B2B relationship management strategy.
If you have yet to try corporate gifting, you may find yourself concerned about your business’s costs or curious about how much of your gifting is tax deductible. Before you setup your corporate gifting budget, it’s important to know your corporate gift taxes and limits to be eligible for deductions.
Understanding Your Corporate Gift Taxes & limits
According to Forbes.com, most businesses spend between $50-150 per gift. However, keep in mind that part of these costs are deductible, as long as you meet the tax conditions.
According to IRS standards, a business gift must be an item that is given to direct customers, clients, or employees to benefit your company ultimately. Here are the general rules to understand your corporate gift taxes & limits so you can save the money and reap the benefits of giving:
- Your deduction limit is $25 per person
- This limit does not include incidental expenses like shipping and handling
- Note that you can purchase gifts of higher value than this amount. However, only $25 will be deducted, and your business must compensate for the rest of the cost
- Only direct gifts qualify for a deduction
- Direct gifts are those offered to employees, clients, and customers
- Indirect gifts are relatives or people connect to these groups
- If giving entertainment-focused gifts, like tickets to an event, you must not be among the people going
- Packaged food items to be consumed at a later time than first receiving them can be considered a deductible business gift
- A cash bonus should not be counted as a gift
The $4 Exception Rule
When debating how to deduct business gifts, your impulse may be to aim low for pricing and high for quantity. It’s often believed that corporate gifting means advertising and spreading your logo into the homes and offices of clients, staff, and donors. If you opt for bulk corporate gift-giving, where each unit is worth $4 or less, remember that they are not actually considered business gifts. Therefore, these expenses will not be deductible under the $25 limit rule above, as they do not fall under the gift category. This applies if these $4 or fewer items meet these criteria:
- Has your company or business name imprinted on them
- They are bought in bulk. Causing the same item $4 or less being distributed widely
- Are intended to promote your business in other company locations
- These include marketing materials like signs, brochures, or display cases/racks
These items cannot be claimed toward your corporate gift tax deductions. If you purchase these bulk promotional items, you will still have $25 available to be spent on business gifts that will be compensated.
This means that the $25 deduction per direct business gift is basically a helping hand to ensure you buy the proper quality business gifts to impress your supporters. Keep in mind that this item will represent your business’ status, so quality over quantity is best.
Strategize Your Gift-Giving
There are some methods to consider before running to the mall to get a bulk order of $25 or fewer gifts for everyone. You want to think about your business brand, and how a gift can represent it.
Remember that the entire purpose of your corporate gift-giving is to show your employees, clients, customers, and donors that you recognize their contributions to your business, and you are grateful for every one of them. You must be thoughtful and selfless when starting your business gift brainstorming and making your choices.
Presentation will matter. That is why you should consider customizable options that are consistent with your company style and colors, while keeping them personal.
These are some ideas for corporate gifts within the business tax limits to help your company find effective gifts to show your appreciation and improve your B2B, customer, donor, and employee relationships:
Give Gifts That Will Last
Consider items that will be valuable in your receivers’ households or office spaces and other settings in their day to day lives. A long-lasting gift represents your own company’s endurance and quality. It also indicates an ongoing positive, reliable impression on your team and clients.
Give Year-Round
Who said you could only give during the holidays? Surprise your team and clients with spontaneous gifts throughout the year. The random rewards will truly showcase your company cars.
Opt for something sweet that’ll offer the sugar kick they need any time of year. Check out our entire collection of food and candy gifts that come in customizable packaging, so those trying them know that your business has good taste.
Offer Something They Can Use On A Daily Basis
By investing in a business gift that is also a useful everyday item, your company will always be at the front of your staff, client, and customers’ minds. A high-quality, Moleskine Pocket Notebook Gift Set will allow them to keep a note of your company at all times. If they need any services that you offer, they’ll know to come to you. There are a wide array of customization options here, including:
- Screen printing
- Full color printing
- Laser engraving
- Debossing
- Hot stamp printing
Long Term Benefits of Giving Business Gifts to Your Employees
By simply recognizing your employees’ hard work, you will find them more motivated to be productive and continue helping your business earn its high profits. This will furthermore improve your reputation to obtain top talent in the industry and keep them long term. Employee satisfaction is vital for maintaining a team that is of high quality and dedicated to your success.
While a cash bonus is a great way to show thanks, it’s been proven that a tangible gift is more valuable than money for promoting continued productivity. Receiving an item that their employer purchased, prepared, and placed in their hands is more effective than simple money. The thoughtfulness and personal touch of a corporate gift are enough to inspire your employees to work efficiently and improve staff turnover rates.
Ending the Year Right Means Beginning the New Year on the Right Foot
A successful corporate gift giving strategy not only says thank you for the great year, but more importantly it says let’s do even bigger and better things in the new year.
To ensure that your gifts leave the right memorable mark on those who receive them, visit iPromo for outstanding unique, customizable corporate gifts to fit your budget now that you understand the taxes and limits involved.