Gift Tax Deduction: What Counts and What Doesn’t?

gift tax deduction

15 Nov Gift Tax Deduction: What Counts and What Doesn’t?

As the holidays come closer, you are probably planning to get gifts for your friends and family. With Christmas always conveniently at the end of the year, you may be wondering if some sort of gift tax deduction applies.

After all, most last-minute tax deductions are good ones in our book!

The Rules for Deducting Christmas Gifts

We’ll cut right to the chase. If you’re wondering if you can take a deduction for gifts you get for your friends and family: you can’t. Those are entirely personal expenses and have nothing to do with your business. We wouldn’t recommend trying to write them off anyway, because the IRS pays special attention to that stuff. Many people try to take those deductions when they don’t apply and end up getting caught.

There are other things you need to know. There exists a gift tax (no, we’re not making this up) on gifts valued at more than $14,000 to anyone other than your spouse. While most people aren’t throwing around thousands of dollars to all their relatives, that’s something to keep in mind if you want to give someone a hefty present this year.

These Are the Gifts That Give You Deductions

Generally, there are only two times where a gift tax deduction can be applied: giving a charitable donation and handing out business gifts. The former is when you donate to a registered not-for-profit organization, like a church or a community center. Any contribution you make to those types of organizations are completely tax-deductible. If you’re looking for extra deductions, you may want to add these places to your Christmas list.

The latter only applies if you’re running your own business and hand out gifts to your clients or employees. When giving out individual gifts, remember that you can only take a maximum deduction of $25 per person. Your gifts can be as extravagant as you like, but the limit for deductions is $25.

To keep yourself on the safe side, remember these rules: personal gifts to your friends and family are not tax-deductible. If you’re spending over $14K on them (excluding your spouse), then you’re subject to a gift tax.

Business gifts and charitable donations are completely tax-deductible, but they must be registered not-for-profit organizations.

Have any other questions about gifts and how they can affect your taxes? Give us a call at 614-524-4888 or message us on Facebook!

We work closely with you to handpick a solution for your unique tax situation.
Call Now ButtonNeed Tax Help Now? Call Us!