Each year around this time, the holdidays are upon us, and we usually provide year end gifts. Wouldn’t it be great if you can deduct some or most of these year end gifts as well as other types of gifts such as birthday and house warming gifts? Well, you can if you do it correctly.
The general rule is if you give a business gift, you can deduct up to $25, per person, per year….period. A husband-wife is considered one person. However, where there is a will, there is a lawyer. Gifts of entertainment, such as tickets, are 50% deductible with no limit. However only the face value of the ticket and not scalpers fees or markup. Thus, if the face value of the ticket is $100 but you pay $150 to a scalper or ticket agency, you can only deduct 50% of the $100.
Candaians, however, can deduct 50% of business gifts with no limit. They are NOT subject to the normal $25 max on non-entertainment gifts.
Also, to deduct any gift and bullet proof your tax return, you need to document:
Who, why you made the gift, How much, when and what was the gift.
Thus, when you thinking about making those Christmas and Hanukkah gifts, these might be deductible if you do it correctly.