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10 Oddball Tax Deductions

11 Most Overlooked Tax Deductions

Updated for 2011

Small Business Deductions: Meals and Entertainment

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Deducting Business Gifts

You can deduct $25 per person for business gifts.

Don't include the following items in figuring the $25 limitation:

Gifts that show your company name that cost $4 or less.
- For example, pens, flash lights, desk set, etc. You don't have to keep records of who you gave these items to. You just deduct the total cost of these items and hand them out to business associates.
Promotional items you have on the business premises that are used by the person you give the items to (e.g., signs, displays, racks, etc.).
Costs to wrap, insure, mail, or deliver the gift.
- If you send a gift contained that is contained in an ornamental basket or container, where the value of the basket or container is substantial in relation to its contents, add the cost of the basket or container to the cost of its contents.

Bonuses to employees: If you pay out bonuses to employees make sure you do not describe such payments in your records as gifts. If audited, an IRS seeing this description may limit your deduction to $25, the amount allowed for a gift. You would have to prove that any excess over $25 was compensation.

Husband and wife:

You and your spouse are considered as one person for figuring the $25 limitation.
If you give the spouse of a business associate a gift, it is considered given to the business associate.
If the spouse of a business associate has a bona fide business connection with you, independent of your business associate, the gift is not considered as made to the associate (unless it is intended for the associate's use).

Packaged food:

Packaged food given as a gift that is intended to be consumed at later time is a gift.

When giving tickets to events are gifts:

Giving business associates tickets to theater or sporting events where you do not also attend the event with them may be treated as either...

gifts, subject to the $25 limitation, or as
entertainment expenses subject to the entertainment expense rules.

When giving tickets to events are not gifts:

If you give business associates tickets to the theater or a sporting event and you accompany them, the cost of the tickets are not treated as a gift, they are entertainment expenses. Deduct 50% of the face value of the tickets even if you had to pay more, for example, to a scalper.

Certain gifts do no come under the $25 limitation:

Tax free scholarships
Tax free prizes and awards, and
Achievement awards to employees in recognition of length of service or safety achievement.

Bear in mind, employee awards must not be disguised compensation. To avoid misconstruing an award for compensation, don't present them around the same time annual salary adjustments are given. In addition, do not give awards that discriminate on behalf of highly compensated employees.

The deduction amount you're allowed for employee awards depends on whether the achievement award is considered an qualified plan award or a non-qualified plan award.

Meals and Entertainment Expenses: Gift or Entertainment? Taking Turns Paying the Bill

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Need Some Deductions for 2011?

Small Business Deductions: Meals and Entertainment

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Deducting Business Gifts

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