The business gift limit belongs on Line 27a, other expenses.
Why line 27a
The business gift deduction is capped at $25 per recipient per tax year, a figure fixed in the statute decades ago and never indexed, so a $200 gift basket to one client produces a $25 deduction. The deductible $25 is itemised in Part V and totals to line 27a. Gifts to the same person across the year are added together before the cap is applied, and a gift to a client's spouse or family counts as a gift to the client. Incidental costs that add nothing to the gift's value, engraving, packing, insuring and posting, sit outside the cap and are deductible on top.
Stop looking up lines one at a time. ClaryBook totals your year into an IRS Schedule C worksheet in form order, Part I and Part II line by line, so the business gift limit lands on Line 27a without you sorting it.
Start for freeWhat the business gift limit is confused with
- Line 8, advertising
- Items costing $4 or less that carry your name permanently imprinted and are handed out widely are promotional, not gifts, so they are advertising on line 8 and the $25 cap does not touch them.
- Line 24b, deductible meals
- Food and drink given to a client can be treated as a meal rather than a gift, which changes the limit from $25 to the deductible meal percentage, so pick the better treatment and apply it consistently.
Examples that belong on line 27a
- $200 wine basket to one client: $25 deductible, $175 not
- Two $40 gifts to the same client in one year: still $25 total
- $25 bottle plus $8 engraving and $6 postage: $39 deductible
- $120 of $4 branded pens handed out at a trade show: all on line 8, not capped
- $60 hamper split between a client and their spouse: one $25 cap, not two
What does not belong here
- Deducting the full price of the gift, which is the error the cap exists to stop.
- Counting a client and their spouse as two recipients to double the cap.
- Gift cards and cash equivalents handed to your own workers, which are wages rather than gifts.
- A branded item worth more than $4 handed out generally, which is a gift to each recipient rather than advertising.
The limit that applies
The limit is $25 per recipient per year and has never been indexed for inflation. Incidental costs such as engraving, packaging, insurance and postage do not count against it.
What to keep
Keep the receipt, the recipient's name and the business relationship, and the date. A running gift list by recipient is the only practical way to apply a per-recipient annual cap at filing time.
Other expenses on line 27a
| Expense | Line |
|---|---|
| a background check | Schedule C, Line 27a |
| a branded gift for a client | Schedule C, Line 27a |
| a business coach | Schedule C, Line 27a |
| a conference registration fee | Schedule C, Line 27a |
| a hot-desk day pass | Schedule C, Line 27a |
| a payroll service | Schedule C, Line 27a |
| a professional certification renewal | Schedule C, Line 27a |
| a stock photo license | Schedule C, Line 27a |
| a telephone answering service | Schedule C, Line 27a |
| a trade show booth fee | Schedule C, Line 27a |
| a translation service | Schedule C, Line 27a |
| an online course | Schedule C, Line 27a |
Related lookups
Sources
This page explains how Schedule C lines work. It is general information, not tax advice for your situation. If an expense is large or the answer turns on a fact about your business, confirm it with your tax preparer.
Looking for a different expense? The full Schedule C line lookup has every line from 8 to 27 with the expenses that belong on each, and Schedule C expense categories walks the whole form in order.
Stop looking up lines one at a time. ClaryBook totals your year into an IRS Schedule C worksheet in form order, Part I and Part II line by line, so the business gift limit lands on Line 27a without you sorting it.
Start for free