Small business work closely with clients and vendors. These businesses may want to give gifts to their partners for any number of reasons. But there some things to keep in mind before making a business gift.
Should you give gifts to your clients and vendors?
It is important for small businesses to stay in the minds of their clients and vendors. An effective way to do this is with business gifts. While it is traditional to give business gifts during the holidays, gifts are welcome at any time of year.
It is legal for a business to give gifts to clients and vendors, but there are some things to keep in mind. There are tax considerations regarding gifting that small businesses should know. Also, when dealing with government clients and vendors, you should be cautious, as improper gifting is considered bribery.
Finally, while gifting is a considerate act, it is also a good way to interface with clients. A memorable or useful gift can keep you in your client’s thoughts every time they use it. A bit of creativity and thoughtfulness can go a long way with business gifts.
Can I give clients gifts?
As a small business owner, you should always be looking to improve relationships with clients. Giving gifts is a simple way to stay in touch with your clients. You can celebrate holidays, project completions, and finalizing business arrangements by giving gifts.
Gifts are a great way to let your clients know that you are thinking about them. Even when you are not directly interacting, a memorable or useful business gift can put you in your client’s minds. A personalized gift goes even further towards achieving this goal.
While useful, gifting should not be your primary method for improving client relations. If your business does not provide quality goods or services, no gift can make up for that.
Gifts should be something that adds to the relationship you’ve already built. They should not take the place of what you haven’t done.
Are client gifts tax-deductible?
Business gifts are tax- deductible, but there are a few limitations.
You can deduct no more than $25 of the cost of the business gift to an individual. This is per person per tax year. You can give multiple gifts to the same person. However, you can only deduct $25 in total regardless of the number of gifts.
Gifts that cost $4 or less that have your business name on them are not deductible. This includes items like stationery and pens.
Also, any item that considered as either a gift or entertainment is considered entertainment and cannot be deducted. This includes ‘experiences’ such as tickets for concerts and sporting events.
As with anything tax-related, you need accurate records to prove your claims. Make sure your records include the purpose of the gift as well as the cost.
What makes a good business gift?
There are a few things to keep in mind when deciding upon a gift. Budget yourself wisely, as pricey gifts may not be as useful as some inexpensive gifts. An expensive gift one year followed by a cheap gift the next may leave a negative impression, so keep the gift prices consistent.
You should try to select gifts that are useful and memorable. Something like a coffee maker or travel pillow is very useful. When used, your clients will remember who gave them that gift.
When choosing business gifts, personalizing them towards the receiver is always a good idea. Be attentive; if your client always orders wine with business dinners, a bottle of wine would make an excellent gift.
A time-tested method is to personalize gifts by engraving or labelling them with your company name and/or logo. While smaller items under $4 in value don’t count for tax deductions, more expensive gifts with engraving do.
Embroidering your business name on a travel pillow reminds the user of your gift each time they use it. The cost of personalizing gifts by engraving doesn’t add value for tax purposes. Incidental costs like engraving and shipping don’t count towards the $25 value of the gift.
What are some examples of good gifts?
- USB Charger: A portable battery for recharging electronic devices like smartphones or tablets. Have your company name/logo printed on them for extra value.
- Neck Pillow: A pillow that supports the neck while seated. If your clients are heavy business travelers, they will love this gift.
- Desk Lamp: While a seemingly mundane gift, desk lamps have great utility value. You can even find lamps with USB ports or wireless chargers.
- Board Games: For small, creatively-focused clients, a board game can be a great gift. Board games are good group fun, and having them around the office helps to increase the bonds between co-workers.
- Office Plants: Having plants around often improves the workplace, and can increase well-being. Indoor plants, like snake plants or succulents, require little care.
- Water Bottle: Reusable water bottles are a great gift that not only hydrates but also reduces waste. Print your business name/logo on them, and your clients will think of you every time they take a drink.
Final thoughts about business gifts
You should always be looking for opportunities to give business gifts to your clients and vendors when appropriate. Thoughtful gifts to celebrate good times and good fortune are always welcome and help strengthen your business relationships.
