Updated November 7, 2026. Quick answer: You can deduct no more than $25 a year for business gifts to any one person, and the record has to show the cost, the date, a description of the gift, its business purpose and the recipient’s business relationship to you. Section 274(b) sets the $25 and section 274(d) lists what must be substantiated. Keep one line per gift per person, with a running total for each person, so the $25 is something you can check rather than estimate.
On deductions by profession: tax deductions for real estate agents.
The $25 limit and who it counts against
This page reads the primary sources linked under Sources, as retrieved on November 6 and 7, 2026. Publication 463 is the 2025 edition.
Publication 463 states it: “You can deduct no more than $25 for business gifts you give directly or indirectly to each person during your tax year.” The statute counts earlier gifts: the limit applies “to the extent that such expense, when added to prior expenses of the taxpayer for gifts made to such individual during the same taxable year, exceeds $25”. An indirect gift counts too: “A gift to a company that is intended for the eventual personal use or benefit of a particular person or a limited class of people will be considered an indirect gift to that particular person or to the individuals within that class of people who receive the gift.” The publication’s gift-basket example gives the arithmetic: “You and your spouse can deduct a total of $75 ($25 limit × 3) for the gift baskets.”.
What is not a gift, and what is not part of the cost
The statute carves out two items from the word gift: “an item having a cost to the taxpayer not in excess of $4.00 on which the name of the taxpayer is clearly and permanently imprinted and which is one of a number of identical items distributed generally by the taxpayer”, and “a sign, display rack, or other promotional material to be used on the business premises of the recipient”. Publication 463 also keeps small add-ons out of the cost: “Incidental costs, such as engraving on jewelry, or packaging, insuring, and mailing, are generally not included in determining the cost of a gift for purposes of the $25 limit.” Record the incidental costs on their own line so the cost of the gift stays clean.
What the record has to show
Section 274(d) lists the proof for any expense for gifts. The taxpayer must substantiate “by adequate records or by sufficient evidence corroborating the taxpayer’s own statement” four things: “the amount of such expense or other item”, “the date and description of the gift”, “the business purpose of the expense or other item”, and “the business relationship to the taxpayer of the person receiving the benefit”.
| Element | What to write | Where it can come from |
|---|---|---|
| Amount | What the gift cost, with incidental costs on a separate line | Receipt or card line |
| Date and description | The date given and what it was | Receipt, gift list |
| Business purpose | One line on why, such as a thank-you for a project | Your note, written when you give it |
| Business relationship | Who the person is to your business, and their company | Client or contact list |
| Running total | This year’s total to that person, to watch the $25 | This page’s suggested column, not a rule |
Timing and the receipt
The regulation values a prompt record: “a record of the elements of an expenditure or of a business use of listed property made at or near the time of the expenditure or use, supported by sufficient documentary evidence, has a high degree of credibility not present with respect to a statement prepared subsequent thereto when generally there is a lack of accurate recall”. A one-line entry on the day you buy the gift is that record. Publication 463’s receipt rule lists “Your expense, other than lodging, is less than $75.” as an exception to the documentary evidence requirement. This page’s reading: a gift that cost under that amount may not need a receipt, but the four elements above are still needed in your record.
Where an app fits
A gift purchase is one more receipt. SparkReceipt’s home page says you can snap a receipt at the counter in the phone app. That is the vendor’s statement; this page has not used the product. The recipient, the purpose and the running total are your notes either way, and a spreadsheet with one row per gift holds them for free.
Common mistakes
- Tracking the $25 per gift instead of per person for the year; several small gifts to one person add up.
- Counting engraving or shipping inside the gift’s cost when the publication treats it as incidental, or the reverse.
- Recording the gift without the recipient’s business relationship or the purpose, which are two of the four required elements.
- Writing the business purpose at tax time from memory; the regulation treats a later statement as far less credible.
Related: IRS receipt rules for business expenses, Schedule C line 48, and Receipts and Expense Records for a One-Person Business.
Sources
- IRS Publication 463 (2025), Travel, Gift, and Car Expenses
- 26 U.S.C. 274, Disallowance of certain entertainment, etc., expenses (Cornell LII)
- Treas. Reg. 1.274-5T, Substantiation requirements (temporary) (Cornell LII, eCFR text)
- IRS, How long should I keep records
Read from the IRS documents linked above on November 7, 2026. General information, not tax advice. Your own facts decide the outcome, and a preparer, the account provider or the IRS is the right place to confirm anything consequential.