J.K. Lasser's Your Income Tax 2013: For Preparing Your 2012 Tax Return

20.26 Business Gift Deductions Are Limited

Deductions for gifts to business customers and clients are restricted. Your deduction for gifts is limited to $25 a person. You and your spouse are treated as one person in figuring this limitation even if you do not file a joint return and even if you have separate business connections with the recipient. The $25 limitation also applies to partnerships; thus a gift by the partnership to one person may not exceed $25, regardless of the number of partners.

In figuring the $25 limitation to each business associate, do not include the following items:

1. A gift of a specialty advertising item that costs $4 or less on which your name is clearly and permanently imprinted. This exception saves you the trouble of having to keep records of such items as pens, desk sets, plastic bags, and cases on which you have your name imprinted for business promotion.

2. Signs, displays, racks, or other promotional material that is used on business premises by the person to whom you gave the material.

3. Incidental costs of wrapping, insuring, mailing, or delivering the gift. However, the cost of an ornamental basket or container must be included if it has a substantial value in relation to the goods it contains.

If you made a gift to the spouse of a business associate, it is considered as made to the associate. If the spouse has an independent bona fide business connection with you, the gift is not considered as made to the associate unless it is intended ...