The Ultimate Guide to Holiday Client Gifting (Without Getting on the IRS Naughty List)
- Ashley
- Oct 21
- 3 min read
The holidays are the perfect time to show your clients a little extra love. Sending a thoughtful gift is more than just a kind gesture; it’s a chance to reconnect, say “thank you,” and remind them how much you’ve appreciated working together this year.
But before you start filling your cart with cozy candles and artisan treats, let’s hit pause. Because yes… even gift-giving comes with a few IRS rules. (Not exactly the festive vibe you had in mind, but trust me, it’s better than your accountant turning into the Grinch come tax season.)
The good news? This Guide to Holiday Client Gifting will help you choose thoughtful gifts and stay tax-smart. Let’s break it all down.
1. The $25 Rule
Here’s the scoop: the IRS lets you deduct up to $25 per client gift.
That doesn’t mean you can’t spend more; it just means only $25 of that amount will count as a tax-deductible business expense.
Example: Say you’re eyeing a luxe $85 gift box filled with gourmet chocolates, artisan coffee, and a candle that smells like pure joy. You can absolutely go for it—but only $25 of that total will be deductible.
Bottom line:
Splurge if it keeps a high-value client happy.
Stick closer to the $25 limit if your budget says otherwise.
(Pro tip: remember this is $25 per client, not per gift—so if you’re sending several, those numbers add up fast!)
2. Incidental Costs Don’t Count
Here’s some good holiday news: things like packaging, bows, engraving, shipping, or insurance don’t count toward that $25 limit.
Why? Because those are considered incidental costs—they don’t add value to the actual gift. And considering how shipping prices have climbed lately, that’s a small but mighty win for your wallet.
Add this note to your Guide to Holiday Client Gifting checklist: wrapping and shipping are free and clear of the deduction cap!
3. The Exceptions Rule
Not every “gift” is truly a gift in the IRS’s eyes. Some items fall under promotional materials—and that’s actually good news.
Here’s what doesn’t count toward your $25 limit:
Items under $4 with your logo (like pens, mugs, or notebooks)
Items you distribute widely (like swag bags or event freebies)
Promotional displays (like branded signage for their office)
These count as marketing, not gifts, so they fall outside the IRS limit.
Want more clarity on what qualifies? Check out our Small Business Tax Deductions Guide for more surprising (and totally legit) write-offs.
4. Gifts vs. Entertainment
This one confuses a lot of business owners: if something could be seen as entertainment, the IRS will treat it as entertainment—and that’s not deductible.
Example: Golf tournament tickets or concert passes? Not considered gifts. Not deductible (not even the first $25).
Stick with true gifts if you want that tax break. Your Guide to Holiday Client Gifting mantra: If it entertains, it doesn’t deduct.
Bonus Tip: Documentation Matters
Even the most thoughtful gift won’t hold up under an IRS audit without documentation. So make sure you keep a quick record of:
The cost of the gift
A brief description
The date given
The business purpose
The recipient’s name and relationship to your business
(Pro tip: If organizing receipts makes your head spin, this is where solid bookkeeping support saves the day.)
Wrapping It All Up (Pun Fully Intended)
Client gifts are a thoughtful way to end the year, strengthen relationships, and celebrate shared wins. But they’re also a business expense—and that means a little strategy goes a long way.
Stick to the $25 deduction limit, use the exceptions wisely, and document everything clearly. When you follow this Guide to Holiday Client Gifting, you’ll keep both your clients and your accountant happy.
So go ahead, shop with confidence, give with heart, and spread that holiday cheer knowing your finances are wrapped up neatly, too.
Happy gifting, friend!