Seasonal Business Expenses and Gifts: What Can You Write Off?

Written by Ashley Eneriz on December 13, 2017

For many freelancers, including myself, the holiday season is especially stressful. Workloads slow down, and the scramble to get our taxes together begins. Before I knew I could write off gifts as business expenses, I’d make a large monetary donation toward the end of the year to help break even on my taxes. But then I found out that I can actually decrease my current tax load when I send my clients business gifts to express my gratitude and celebrate the holiday season. Wondering what types of business expenses can serve as tax deductions? Read on.

Business Gifts

Consider showing your clients some extra appreciation during the holidays with a thoughtful gift and note. You can stick with something simple like a popcorn tin, an assortment of cookies, seasonal flowers or a gift card, or you can think of something more personal that you know they’d enjoy.

By sending along seasonal gifts to your clients, you can help to ensure these relationships continue to flourish in 2018, while also opening up a new opportunity for a tax write-off. The only catch: The IRS allows a maximum of a $25 deduction for each person you’re gifting.

Charitable Donations

Monetary or material gifts to charity can also greatly decrease your tax bill, but you have to give according to IRS rules. All donations must be made to a qualified charity, so make sure to either ask for the charity’s IRS letter or search the exempt organizations database before you take action. When donating material gifts, you can only write off the fair market value of the item, so don’t think you can claim a $100 deduction for a three-year-old office chair if you can’t sell it on Craigslist for more than $20.

Not sure where to give just yet? A donor-advised fund, or DAF, allows you to set aside money for charity in an account and get the immediate tax benefit. Your DAF then allows you to distribute your charitable funds over time. One major benefit of giving this way is that you can streamline the record-keeping process, as there’s no need to hang on to multiple receipts. An added bonus: Your cash donations are eligible for an income tax deduction of up to 50 percent of your adjusted gross income.

Volunteering your time to support the cause of your choice is another great way to give back this season, though it unfortunately can’t be deducted from your taxes. But you can deduct any travel expenses or supply costs required for your volunteerism, like uniforms or parking charges.

Entertainment Expenses

Another way to gain new clients or show your current clients how much you appreciate them is to treat them to a meal, drinks or a show. You can deduct meals and entertainment costs for networking purposes, but make sure your intent is focused on your business, not writing off those awesome Hamilton tickets. The IRS will allow you to claim 50 percent of these business expenses. Just remember to keep itemized receipts and notes concerning the clients with whom you conduct business at these meetings.

What makes the most wonderful time of the year even more wonderful? The fact that certain types of holiday giving and gifting can benefit your tax bill. Try donating money or items you no longer need to your favorite charity before the end of the year. A small gift and a thoughtful thank you note can also serve as a valuable deduction — and make a good impression with your past and current clients. Just make sure you keep thorough records of your deductions, and talk with an accountant that specializes in self-employment if you have any further questions about the types of business expenses you can write off.

Leave a Reply