How Can I Maximize Advertising and Gift Deductions?

Posted on April 26, 2023

This is part of a bigger series that we did for our Ultimate Guide to Maximizing Business Deductions and Write-Offs. Be sure to check out everything that we discussed in that.

Today we are going to be focusing on two key parts, advertising and gifts.

What Is An Advertising Expense?

These would be costs that are incurred to promote your business. Some examples include:

What Planning Opportunities Exist Around Advertising Expenses?

  • Move From Charitable Contribution to Advertising
    • With the new increased standard deduction, many lose out on getting a tax advantage to giving to charity. Supporting a charity? If you can find a way to tie it to advertising you can take it as an advertising expense which is more beneficial than a charitable deduction. Some examples are:
      • Sponsoring Local Event: Put your logo on items or promotional materials that could then lead to new business.
      • New Client/Social Media/Review Charity Drive: Run a promo that says for every new client or follower or review you will donate $x to charity.
  • Clothing
    • Clothing is traditionally NOT deductible if it is appropriate for everyday use. However, put your logo or brand on your clothing, then make it a deductible advertising expense. 
    • Note: Do not get greedy in this area. Still do the sniff test. Is putting your logo on the inside a suite coat make it deductible? No. However, would putting a logo on a polo shirt be deductible? Generally Yes.

What Is A Gift Expense?

The cost of business gifts to current or prospective customers is deductible up to a maximum of $25 per customer per year. Examples include:

  • Gift Cards to Stores or Restaurants
  • Flowers
  • Baskets
  • Wine

What Planning Opportunities Exist Around Gift Expenses?

  • Different Categorization
    • Can you find a separate category that would be valid to code an item under? Let’s say you want to give iPads to your team, could you load it with content and training materials to categorize as a training deduction vs gift. Could it be used to do work instead of personal use?
  • Married Couple (or Family)
    • The $25 limit is per individual, if you are gifting to a married couple you can double it to $50, assuming you have a relationship with both.
  • Branding and Logo 
    • Is there a way you can put your logo or brand on specific items and treat them as an advertising expense? The following items are not considered gifts:
      • An item that costs $4 or less and has your name on it and is widely distributed (think: pens, desk sets, bags, accessories, etc.)
      • Signs, display racks, or other promotional material to be used on the business premises of the recipient.

Again, this is just a nibble into some planning opportunities to help you maximize your business deductions. I want to encourage you to check out our full series on this in our Ultimate Guide to Maximizing Business Deductions and Write-Offs to also understand what you need to ensure you are doing to protect yourself and provide full documentation as well.

Remember, do not get greedy and always do the sniff test. If I was explaining this business purpose to an IRS auditor, would it sound legit?

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