Client Holiday Gifts: The $25 Deduction Limit

You're self-employed. Maybe you clean houses, groom dogs, cut hair from a van, or sell real estate. You're about to spend a few hundred dollars thanking your regular clients for the year, and you want to know how much of it you can write off. The federal answer: $25 per client per tax year for the gift itself. Wrapping, packaging and postage don't count toward that $25, so you can deduct them in full. The miles you drive to hand the gifts out are ordinary business miles, worth 76¢ each for the rest of 2026.

The $25 figure is written into the tax code (IRC §274(b)) and has never been raised for inflation. So for most people the limit, not the price tag, decides the deduction. The rest of this page covers the details that change the number: who counts as one recipient, which items don't count as gifts at all, and what to write down.

The rule in one paragraph

IRS Publication 463 says you can deduct no more than $25 for business gifts you give, directly or indirectly, to each person during your tax year. Spend $60 on a client's gift and you deduct $25. Spend $18 and you deduct $18. The limit applies per recipient for the whole year, not per gift, so a thank-you gift card in March and a basket in December share the same $25. On the other hand, a client who gets something in January 2027 has a fresh $25 for 2027.

Who counts as one recipient

• A client's family is usually the client. A gift to a customer's spouse or kids is generally treated as an indirect gift to the customer. Gifts to a household you clean or a couple you sold a house to usually add up to one $25 limit, not two or four. The exception is a family member you have your own, independent business connection with.
• You and your spouse are one giver. If you both give gifts, the IRS treats you as one taxpayer, even if you run separate businesses or each know the recipient independently. A partnership and its partners are also one giver.
• A gift to a company can be a gift to people. If the gift is meant for the personal use of a particular person, or a small group, at the company, it counts as a gift to those people. Pub 463's example: three $80 baskets sent to a company and taken home by three executives are a $75 deduction ($25 × 3), not $240.

What doesn't count toward the $25

• Incidental costs. Engraving, packaging, gift wrap, insurance and mailing aren't included in the gift's cost for the $25 limit, as long as they don't add substantial value. Postage to mail a tin of cookies is incidental. A decorative basket that's worth a lot compared with the fruit inside isn't; that's part of the gift.
• Branded items under $4. An item that costs $4 or less, has your name clearly and permanently printed on it, and is one of many identical items you hand out widely isn't a gift for this rule. Pens, magnets and calendars with your logo qualify. Treat them as marketing instead.
• Promotional material for their premises. Signs, display racks and similar promotional material for the recipient to use at their place of business also aren't gifts.

A worked December

A self-employed house cleaner has 14 regular client households. She runs the business from a home office where she does her scheduling and billing, so her drives from home to clients are business miles. Everything below is hypothetical.

The $210 she spent on the gifts above $25 each isn't deductible. The wrapping and postage stay deductible because they're incidental. The magnets aren't gifts under the $4 exception, so they're a marketing cost. The miles are deductible because driving to visit clients is business transportation, separate from the gift limit.

Keep the scale in mind. At a 22% income tax bracket plus self-employment tax, a $25 deduction saves roughly $9 of federal tax. Client gifts are mostly a goodwill expense. Buy them because they keep clients, not for the write-off.

The drive is the part people forget

The $25 cap applies to the gift's cost, not to your car. A drive whose purpose is dropping gifts at clients' homes or offices is "visiting clients or customers," which Publication 463 lists as business transportation. On the standard mileage rate that's 76¢ a mile from July 1 to December 31, 2026 (72.5¢ earlier in the year). Parking and tolls on those trips are deductible on top.

Two limits apply. First, the drive from home to the first stop follows the same commuting rules as any other workday. If your home isn't your principal place of business, the first and last legs are usually commuting; business miles vs. commuting miles walks through it. Second, a stop at a client's house on the way to your own family dinner is a business stop inside a personal trip, so log only the extra miles the stop added. The same split applies to client meetings on a holiday trip.

What to write down

Publication 463's recordkeeping table asks for these details for gifts:

• Cost of each gift, with the receipt.
• Date you gave it.
• Description of what it was.
• Business purpose, such as "year-end thank-you to a regular client."
• Business relationship: who received it and how they're connected to your business.

You don't always need every recipient's name. If it's clear you aren't trying to get around the $25 limit, say by handing one or two small items to many customers, a general description of the recipients is enough. For a list of 14 households, though, writing the names down takes two minutes and answers the obvious question. For the drive, the log needs the date, miles, destination and purpose, the same as any IRS mileage log entry.

Where it goes on the return

Sole proprietors and single-member LLCs report gifts on Schedule C. Publication 463 puts gift expenses on line 27b, the other-expenses line, which you itemize in Part V. Car expenses go on line 9. Branded giveaways usually go with advertising. For the other costs that sit beside the mileage deduction, see write-offs that stack with mileage.

Who this isn't for

• W-2 employees buying gifts for their employer's clients. Unreimbursed employee business expenses aren't deductible on a federal return. Ask whether your employer reimburses them.
• Gifts to your own employees. Those follow fringe-benefit and wage rules, not this one.
• Donations to charity. Charitable gifts go on Schedule A if you itemize. Charity driving has its own 14¢ rate (medical, charity and moving mileage).
• Holiday parties and client dinners. Those are entertainment and meals, which have different rules.
• Anyone outside the US. This is the US federal rule. State rules usually follow it, but check yours.

Where TaxMiles fits, and where it doesn't

We make TaxMiles, so weigh this accordingly.

• It logs the delivery drives. TaxMiles detects drives automatically. You swipe each one to Business and can add a purpose ("Holiday gifts to clients") and a client name. December business miles are valued at 76¢.
• It can hold the gift total, roughly. The Deduction Finder on the Taxes tab (a Pro tool) has no Gifts category. You'd add the gifts under Other, with a note. The app doesn't know the $25 rule, so enter the capped amount ($25 per recipient), not the receipt total. Otherwise your tax estimate will be too high.
• What it can't do. It doesn't track recipients or check the per-person limit across the year. It doesn't fill out Schedule C, and it isn't tax advice. Keep the receipts and the recipient list yourself; a note on your phone is fine.
• The free plan covers your first 40 business trips in total, not per month. Each driver needs their own subscription; there's no family plan.

Frequently asked questions

Are client Christmas gifts tax deductible?

Yes, if you give them in the course of your business, but only up to $25 per recipient per tax year. A $60 gift basket for one client is a $25 deduction. Wrapping, packaging, insuring and mailing are not counted toward the $25, so those costs are deductible on top.

Is a gift card for a client deductible?

A gift card you give a client as a business gift falls under the same $25-per-person yearly limit as any other gift. A $50 card is a $25 deduction.

Can I deduct the mileage to deliver gifts to clients?

Yes. Driving to clients is business transportation under IRS Publication 463, and the $25 cap applies only to the cost of the gift, not to the car. For July 1 to December 31, 2026, the standard rate is 76 cents a mile. The first drive from home follows the same commuting rules as any other workday.

Do I and my spouse each get $25 per client?

No. If you and your spouse both give gifts, the IRS treats you as one taxpayer, even if you run separate businesses. And a gift to a client's spouse or child is generally treated as a gift to the client, so one household is usually one $25 limit.

Sources: IRS Publication 463 (2025), Travel, Gift, and Car Expenses, chapter 3 (the $25 limit, indirect gifts through a company or a customer's family, spouses and partnerships treated as one taxpayer, the gift-basket example, incidental costs, the $4 imprinted-item and promotional-material exceptions, gift vs. entertainment and packaged food or beverages), chapter 4 (visiting clients or customers as transportation), chapter 5 (Table 5-1 records for gifts; general listing of recipients) and "How To Report" (gifts on Schedule C line 27b); 26 U.S.C. §274(b); IRS standard mileage rates (72.5¢ January 1–June 30, 2026; 76¢ July 1–December 31, 2026). Checked November 2, 2026.

This article is general information about US federal income tax, not tax or legal advice. The worked example is hypothetical and ignores the qualified business income deduction and state tax. Whether a particular gift is a gift, entertainment or advertising depends on the facts; ask a tax preparer before you file. TaxMiles is published by Gigabyte LLC, the company that wrote this article.