As the holidays season ramps up, you might be worrying about how all the festive touches will affect your wallet. Luckily, there are a few areas where you may qualify for deductions (sorry, gingerbread lattes isn’t one of them).
Giving Client Gifts
You can deduct the cost of customer gifts, but the rules are rigid. There is no cap on the amount you spend on a gift, but keep in mind that you will only be permitted to deduct a maximum of $25.00 per year for each gift. However, you will not be able to deduct gift-related incidentals that add no value to the gift like gift wrapping, delivery, monogramming, etc.
If you decide to go above and beyond and purchase a ticket to a play, concert, or sporting event for your customer it becomes a customer/client entertainment cost. You can deduct 50% of this cost.
Holiday Office Party
If you follow a few regulations, then your holiday party is deductible. Firstly, the party must be for employees and spouses only. All employees must be invited to the party. The party must be reasonable. An extravagant party for your small start-up business will likely raise red flags. Lastly, and most importantly, document everything. Keep records of expenses, guests, and any business activities during the event.
Traveling during the holiday season can be deductible, so long as your travel expenses are business related. Any expenses incurred for personal reasons (say, a two-day detour to see your cousin) will not be deductible. To ensure that your travel expenses are deductible, make sure that you are doing business each day of the trip. Keep careful records of what you are doing each day, any meetings or seminars you attend, and how each event relates to your business.
Disclaimer: The McHugh CPA Group blog is intended for educational purposes. Subjects include technology, general business, and accounting and related topics. This blog is not intended to provide any advice. By using this blog site, you understand that there is no CPA/client relationship between you and the Blog/Web Site publisher. The Blog/Web Site, including all contents posted by the author(s) as well as comments posted by visitors, should not be used as a substitute for competent counsel from a qualified advisor in your state.