Making gifts to promote your business is complicated. The information below was provided to us from Bradford Tax Institute.

 

Question

 

To stay in touch and promote my business, I buy dozens and dozens of Starbucks $5 gift cards and send them monthly to my prospects and referral sources. Can I write off the $5 cards

 

$25 Limit

 

You’ve probably heard the expression “between a rock and a hard place.” That’s where your Starbucks gift cards fall. The law is going to treat your $5 Starbucks cards as business gifts.

 

Thus, if you give a card to a referral source every month, your cost is $60 for the year ($5 x 12), but you may not deduct more than $25 for business gifts made to the same person.

 

$4 Exception

 

When you see the $4 exception to the gift rules, you will want to eat nails. The law exempts from the business gift rules and calls it advertising when you give to a customer or a prospect an item.

 

• that costs you $4 or less,

 

• on which you have your name clearly and permanently imprinted, and

 

• that is one of a number of identical items distributed generally by you

 

Inflation

 

Keep in mind that the $4 rule was enacted in 1962, many years before Starbucks came into being. Further, if we applied the consumer price index calculator to that $4 amount, it would inflate to $39 today. The $25 total gift amount inflates to $241.

 

Complaint Route

 

You might consider the complaint route. Both the $4 and $25 limits are out of touch and absurd. They need changes to account for inflation and changes in society. People who deserve your complaints include your

 

 

• U.S. senators,

 

• U. S. congressional representatives, and

 

• trade associations.

 

 

June 9, 2022 | DWHuff Consulting

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