Business Gifts Given

Hi June,

My husband is an Orthopedic Surgeon and works in Indianapolis. He never itemizes business gift write-offs. We have referring physicians who he speaks to throughout the year who are critical to referring heavily to his practice as a specialist. I know he is not comfortable giving a small 25$ gift certificate (and that is the number I heave read) and he spends literally thousands on stuff once a year at the holidays. I think he should and that's great!

Then I said, maybe he should purchase on his business credit card, 20 gift certificates from 100 - 250 dollars. That got us talking yet again about writing these business thank you gifts off our taxes. I wonder if this seems appropriate? It does top me.

Our tax person is very conservative I think. I couldn't care less if we get audited other than the headache. Thoughts?

Thanks
Sue

Hi Sue,

There is no limit on the amount you may spend on a gift for a business associate. The limit is on the amount you may deduct as a business expense. And that amount s $25 per business associate per year.

A more interesting element of your question is that you think it might be different were you to put the expense on a business credit card. There is a lot of misunderstanding about business checking accounts and credit cards. Just because an expense is paid through a business account does not make it a business expense.

I say in my book, Self-employed Tax Solutions that as long as your records are accurate one checking account is perfectly acceptable to the IRS. I think one big factor in the insistence on a business checking account is that it’s supposed to cover up financial shenanigans. Many people like to believe that because something is paid by a business check that makes it a business deduction. Of course, that is not so! The attaché case for your daughter's twentieth birthday, even though purchased with your business check, is not a business expense. But the flowers, paid from your personal account, given to your mother as thanks for typing your business plan, is a business expense.

Best,
June