Business Gifts: The $25 Limit and What to Record
Published November 7, 2026
Publication 463 (2025), Travel, Gift, and Car Expenses, explains the rules for business gifts. If you give gifts in the course of your trade or business, you may be able to deduct all or part of the cost. The publication sets a limit, and this guide explains how it works. It is general information. It is not advice about your case.
The $25 limit
You can deduct no more than $25 for business gifts you give, directly or indirectly, to each person during your tax year. The limit is per person, not per gift. If you give three people a gift in one year, the limit applies to each of the three.
Indirect gifts
A gift to a company that is meant for the personal use of a particular person is treated as an indirect gift to that person. The same rule applies to a limited class of people who receive the gift.
A gift to a member of a customer's family is generally treated as an indirect gift to the customer. This rule does not apply if you have a bona fide, independent business connection with that family member, and the gift is not meant for the customer's eventual use.
If you and your spouse both give gifts, you are treated as one taxpayer. This is true even if you have separate businesses or separate jobs. If a partnership gives gifts, the partnership and its partners are treated as one taxpayer.
An example from the publication
A business sells products to a local company. The owner and spouse give the company three gourmet gift baskets to thank them for their business. The couple pays $80 for each basket, or $240 total. Three of the company's executives take the baskets home for their families. The couple has no independent business relationship with any of the executives' other family members.
In this example, the couple can deduct a total of $75, which is the $25 limit times three. The publication shows the math as $25 times 3.
Incidental costs
Some costs are not counted in the cost of a gift for the $25 limit. These are incidental costs, such as engraving on jewelry, or packaging, insuring, and mailing the gift. Gift wrapping is an incidental cost.
A cost is incidental only if it does not add substantial value to the gift. An ornamental basket can be more than incidental when its value is substantial compared with the fruit inside it.
Items that are not gifts for the limit
The publication lists two exceptions. The first is an item that costs $4 or less, has your name clearly and permanently imprinted on it, and is one of a number of identical items you widely distribute. Its examples are pens, desk sets, and plastic bags. The second is signs, display racks, and other promotional material used on the recipient's business premises.
Gift or entertainment rules can overlap. The publication says an item that could be either a gift or entertainment is generally treated as entertainment. If you give a customer packaged food or beverages to use later, treat it as a gift.
Employees have a special rule. If your employer will reimburse you for a gift and you do not claim the reimbursement, the publication says you cannot deduct the expense. It describes this kind of deduction as a miscellaneous deduction that is no longer allowable.
What to record
For gifts, the publication says to keep records that show the cost of the gift, the date you gave it, and a description of the gift. Keep receipts and any notes that tie each gift to a recipient. Good records make it easier to show that you kept within the limit.
Next steps
Before the year ends, list the business gifts you gave, the recipient for each one, and the cost. Check which recipients were treated as one person under the family and spouse rules. Then apply the $25 limit to each person. If you are unsure how a gift fits these rules, a tax professional can review your list with you.
Sources: Sources: IRS, Publication 463 (2025), Travel, Gift, and Car Expenses (https://www.irs.gov/pub/irs-pdf/p463.pdf) This is general information, not advice about your specific return.
