Are Business Gifts Tax Deductible? The $25-Per-Person Rule
Business gifts are deductible, but only up to $25 per recipient per year. Here is how the limit works, what counts as incidental, and how gifts differ from promotional items.
Mylo Team • September 4, 2026 • 2 min read
The short answer
Business gifts are deductible, but the deduction is limited to $25 per recipient per year. Spend more on someone and only the first $25 is deductible. It is one of the oldest fixed limits in the tax code, and it catches people who assume a generous client gift is fully deductible.
How the $25 limit works
The cap is per person, per year, and it counts direct and indirect gifts to that person together. A $25 gift to each of ten clients is fully deductible; a single $250 gift to one client is deductible only up to $25. If you and your spouse both give gifts, or your business does, you are treated as one giver for the limit.
Incidental costs and promotional items
Incidental costs do not count toward the $25, so engraving, gift wrapping, packaging, insurance, and shipping can be deducted on top, as long as they do not add real value to the gift itself. Separately, branded promotional items that cost a few dollars and carry your business name, handed out broadly, are generally treated as advertising rather than gifts, and are not capped at $25.
Keeping gifts expense-ready
For each gift, keep the receipt and note who received it and the business reason, since the limit is per recipient. Track them alongside your other write-offs the way you would in what you can write off on your taxes, and remember the substantiation basics from IRS receipt requirements.
The faster way: let Mylo keep the proof automatically
This is where Mylo quietly does the heavy lifting. It works in the background to capture every receipt from your inbox and the stores you shop at, matches each one to the card charge that paid for it, and files it as a categorized expense, so when you claim business gifts the proof is already there. No new card and no manual entry: Mylo works on top of the Visa, Mastercard, or Amex you already use, and syncs clean, categorized expenses to QuickBooks. Free for individuals on iOS, Android, and the web; teams are $9/user/mo (30-day free trial).
Sources: IRS guidance on gifts (IRC section 274(b), Publication 463). This article is general information, not tax advice. Rules change and situations differ, so check with a qualified tax professional for your situation.
Frequently asked questions
How much of a business gift can I deduct?
Up to $25 per recipient per year. If you give someone gifts worth $80 over the year, only $25 is deductible. The limit is per person, so gifts to different people each have their own $25 cap.
Do engraving and shipping count toward the $25?
No. Incidental costs such as engraving, gift wrapping, packaging, and shipping are excluded from the $25 limit, as long as they do not add substantial value. Record them separately.
Are branded promotional items gifts?
Usually not. Low-cost items with your name on them, like pens or mugs handed out widely, are generally treated as advertising or promotion rather than gifts, and are not subject to the $25 cap.
Can Mylo track business gifts?
Yes. Mylo captures the receipt and lets you note who a gift was for, so you can keep each recipient under the $25 limit without a spreadsheet.
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