Income & Gifts

Hi June!

Graphic Designer ... 3 years.

I'm in the process of reading your book, Self-employed Tax Solutions, fabulous resource!

I have a question for you. I have a restaurant client that has wonderful food, around the holidays I typically will ask them for a few gift cards and sometimes food for my clients. I write that amount off of their invoice for the month but I'm not sure how to take advantage of the gift deduction.

Hoping I wouldn't have to bill them as normal and then pay them for the above items. Is there an easier way?

Also, I just returned home from a week stay at Disney World. I saved all of my receipts while I was there with my husband. Would it be possible to deduct my portion of the trip if it was for creative renewal/inspiration?

Thank you so much for breaking this all down to bite size pieces of information. You're the best!

Sincerely,
Kristen
Midlothian, VA


Hi Kristen,

I am so pleased you're using my book as a resource. Resource and reference for indies was my intention.

Think of your restaurant/gift situation this way...

Kate's Cafe owes you $1000.
Were Kate to pay you you $1000 in money you'd have $1000 income.
Were you then to give Kate a $200 check for gift cards -- and here it gets a little tricky -- here's how it would work.

You would get to deduct as a business expense $25 per business associate to whom you gave the gift cards. [That's per year. Yes, $25 per year, per associate.]

If you gave $25 gift cards to 8 people, you get a $200 business deduction.

A $200 gift card to one person would get you only a $25 deduction .
Deduction categories in your recordkeeping would look like this:
Business Gift .................. $ 25
Business Gift Excess .... $175

Or ...

Kate pays you $800 and gives you $200 worth of gift cards.
Your income is still $1000.
Your deductions would be the same as above.

You do not have to exchange checks with Kate but you must keep the records on the income and expenses.

BTW -- Kate would have a $1000 expense if she paid you in money and gift cards. A little less were she to pay you in money and food.

On Disney: Can't deduct inspiration.

Best,
June