Quick answer: A business can deduct up to $25 per recipient per tax year for gifts, under 26 U.S.C. 274(b). Gift wrap, engraving, packaging and shipping generally do not count toward the $25. Gifts to employees follow other rules: they are taxable wages unless they are small, occasional non-cash gifts, and gift cards are always wages.
The $25 figure dates from 1962, when section 274 entered the tax code, and the statute has no inflation adjustment. Here is what counts, what does not, and the math on real boxes. This is general information, not tax or legal advice.
| Question | Rule | Source |
|---|---|---|
| How much can you deduct? | $25 per recipient per tax year, counting every gift to that person | 26 U.S.C. 274(b)(1) |
| Who counts as one giver? | You and your spouse; a partnership and its partners | 26 U.S.C. 274(b)(2); IRS Pub. 463 |
| What stays outside the $25? | Incidental costs such as gift wrap, engraving, packaging, insurance and mailing, when they add no substantial value | IRS Pub. 463; 26 CFR 1.274-3(c) |
| What is not a gift at all? | Items of $4 or less with your name imprinted and handed out widely; signs and display racks for the recipient's premises | 26 U.S.C. 274(b)(1)(A) and (B) |
| Food or entertainment? | Packaged food or drink the client will use later is a gift | IRS Pub. 463 |
| Gifts to employees? | Wages, unless a low-value, non-cash holiday or birthday gift; gift cards are always wages | IRS Pub. 15-B (2026) |
What does the $25 business gift limit cover?
Section 274(b) allows no deduction for business gifts to any one person beyond $25 in the same tax year, whether you give directly or indirectly. What you spend above $25 on that client, customer or vendor is not deductible.
You and your spouse count as one taxpayer, even with separate businesses, and a partnership and its partners count as one. IRS Publication 463 gives the classic example: three $80 gift baskets for a client company, taken home by three executives, produce a $75 deduction, not $240.
Do packaging, engraving and shipping count toward the $25?
Generally, no. Publication 463 says incidental costs, such as engraving on jewelry, packaging, insuring and mailing, are generally not included in the cost of a gift for the $25 limit. A cost is incidental only if it does not add substantial value to the gift.
The line is the container. Customary gift wrap is incidental; an ornamental basket worth a lot compared with the fruit inside is not (26 CFR 1.274-3(c)). Our prices include the keepsake box, tissue, ribbon and handwritten note, so treat the full box price as the gift. Shipping you pay at checkout is a mailing cost.
Is a gift to a company treated differently from a gift to a person?
Sometimes. A gift to a company meant for the personal use of a particular person, or a limited group of people, counts as an indirect gift to each of them. A gift to a client's spouse or family member generally counts as a gift to the client, unless that relative has an independent business connection with you.
Treasury regulations add two points. Property given to a business for use in its business, such as a technical manual, is not a gift to an individual. A gift meant for an undesignated member of a large group generally is not treated as a gift to whoever ends up with it, unless you can practically tell who that is (26 CFR 1.274-3(e)(2)). A tray for a whole office may fall under that rule; ask your tax adviser before you rely on it.
How are gifts to employees taxed?
The $25 cap is not the rule for staff. Section 274(b) defines a gift as something the recipient can exclude from income under section 102, and section 102(c) says that exclusion never covers transfers from an employer to an employee. So an employee gift is either taxable wages or a tax-free fringe benefit.
IRS Publication 15-B (2026) lists holiday or birthday gifts, other than cash, with a low fair market value as de minimis benefits that stay out of wages. Cash and cash equivalents, including gift cards and gift certificates, are never de minimis, no matter how small. The law sets no dollar threshold, and the IRS Fringe Benefit Guide notes that the agency advised once, in 2001, that a $100 benefit did not qualify.
Awards for length of service or safety have their own rule: tangible property only, up to $400 a year per employee, or $1,600 under a qualified plan.
What records should you keep for business gifts?
Publication 463 asks for the cost, date and description of each gift. The regulation adds the business reason for the gift and the recipient's name, title or other details that show the business relationship (26 CFR 1.274-5T(b)(5)).
For client boxes, keep the order confirmation and a spreadsheet with one row per recipient: name, company, gift, price, date and reason.
How does the $25 rule work with real gift boxes?
These examples use our current prices and assume one gift per person in the tax year.
| What you send | Cost of the gift | Deductible as a gift | Why |
|---|---|---|---|
| The Thank-You Note Gift Box to one client | $68 | $25 | Shipping sits outside the cap |
| The Boardroom Client Gift Trunk to a client's CFO | $265 | $25 | The trunk is part of the gift |
| Five Corner Office Gift Boxes for five named managers at one client | $690 | $125 | Indirect gifts to five people, $25 each |
| You send a Matcha Ritual Gift Box ($118) and your spouse sends a saffron vial ($20) to the same client | $138 | $25 | Spouses count as one taxpayer |
| The Thank-You Note Gift Box to each employee at the holidays | $68 each | Not a gift under this rule | May be a low-value holiday gift outside wages; ask your payroll provider |
| A $100 e-gift card to an employee | $100 | Not a gift under this rule | Taxable wages |
Shop the guide
- The Thank-You Note Gift Box, $68, 5 items: coffee, chocolate and a mini candle.
- The Corner Office Gift Box, $138, 7 items for the desk, from truffles to a brass pen.
- The Boardroom Client Gift Trunk, $265, 11 items, including 2 g of Raihan Saffron.
- Exclusive Gift House E-Gift Card, $50 to $500, delivered by email.
See every box in Client and Corporate Gift Boxes, our price ladder in Corporate Gifts in Boston, or request a quote on Corporate and Client Gifts. Every holiday cutoff is on our order-by dates page.
Questions people ask
Is the $25 limit per gift or per person?
Per person, per tax year. Add up every business gift to that individual during the year; the deduction stops at $25.
Are gift cards to employees taxable?
Yes. IRS Publication 15-B says cash and cash equivalents, including gift cards, are never excludable as de minimis benefits, no matter how little they are worth.
Does the $25 limit apply to a gift for a whole office?
If the gift is meant for particular people, it counts as a gift to each of them. A gift for an undesignated member of a large group generally is not treated as a gift to the person who ends up with it, so ask your tax adviser how that applies to you.
Has the $25 limit changed for 2026?
No. The statute still says $25, a figure that dates from 1962, with no inflation adjustment.
Sources
- Internal Revenue Service: Publication 463 (2025), Travel, Gift, and Car Expenses
- Legal Information Institute, Cornell Law School: 26 U.S. Code § 274, Disallowance of certain entertainment, etc., expenses
- Legal Information Institute: 26 U.S. Code § 102, Gifts and inheritances
- Legal Information Institute: 26 CFR § 1.274-3, Disallowance of deduction for gifts
- Legal Information Institute: 26 CFR § 1.274-5T, Substantiation requirements
- Internal Revenue Service: Publication 15-B (2026), Employer's Tax Guide to Fringe Benefits
- Internal Revenue Service: Publication 5137, Fringe Benefit Guide
This is general information, not tax or legal advice. Confirm your own situation with a tax professional.
Last updated September 30, 2026 by Emir, founder of Exclusive Gift House.