# Are Client Gifts Tax Deductible? The IRS $25 Rule in Plain English, Quoted From Pub. 463

IRS Publication 463 says you "may be able to deduct all or part of the cost", but "You can deduct no more than $25 for business gifts you give directly or indirectly to each person during your tax year." Packaging and mailing are "generally not included" unless they add substantial value. Ask your tax professional whether a fancy box does.

*We sell a $35 logo mug gift box, printed, packed and shipped to each person's address, so we have a stake in this question. This page quotes the IRS and does not tell you what you can deduct.*

**Key facts** (IRS Publication 463, "For use in preparing 2025 Returns", re-read October 29, 2026):

- **The cap:** $25 per person per tax year for business gifts ([Pub. 463, ch. 3](https://www.irs.gov/publications/p463)).
- **One taxpayer:** you and your spouse count as one giver; so do a partnership and its partners ([Pub. 463](https://www.irs.gov/publications/p463)).
- **Incidental costs:** packaging, insuring and mailing are "generally not included", but only if they don't "add substantial value to the gift"; the IRS's example is an ornamental fruit basket, which "isn't an incidental cost if the value of the basket is substantial compared to the value of the fruit" ([Pub. 463](https://www.irs.gov/publications/p463)).
- **Logo items:** a branded item falls outside the $25 limit only if it costs "$4 or less", has your name "clearly and permanently imprinted" and is "one of a number of identical items you widely distribute." The other exception is signs, display racks and promotional material for the recipient's premises ([Pub. 463](https://www.irs.gov/publications/p463)).
- **The IRS's own example:** $240 of gift baskets for three executives gives "a total of $75 ($25 limit × 3)" ([Pub. 463](https://www.irs.gov/publications/p463)).

Part of our [gift rules and taxes](https://personalizedgiftsdelivered.com/gift-rules) section: every rule quoted from the source and dated.

## Is the $25 Limit Per Gift or Per Person?

Per person, per tax year. Chapter 3 of Pub. 463 opens with what the deduction is and then caps it:

> "If you give gifts in the course of your trade or business, you may be able to deduct all or part of the cost."
>
> "$25 limit. You can deduct no more than $25 for business gifts you give directly or indirectly to each person during your tax year."
>
> [IRS Publication 463 (2025), ch. 3 "Gifts"](https://www.irs.gov/publications/p463). Read October 29, 2026.

Two gifts to the same client in one year (a holiday box and a birthday gift) count toward one $25. A holiday gift to 40 clients is 40 separate $25 limits, one per person, unless the rules below combine some of them.

Is the $25 still current? The irs.gov edition, "For use in preparing 2025 Returns", still says $25. So does the tax code: 26 U.S.C. §274(b)(1) still caps the deduction for gifts to one person at $25 a taxable year ([Cornell LII](https://www.law.cornell.edu/uscode/text/26/274), which includes the July 4, 2025 changes in Pub. L. 119-21). For changes after this edition was published, the IRS points to IRS.gov/Pub463.

This is information, not legal or tax advice. Check the current rule (or ask your tax professional) before you send.

## Do Shipping and Packaging Count Toward the $25? The "Ornamental Basket" Catch

Pub. 463 answers in two parts, and the second matters as much as the first:

> "Incidental costs, such as engraving on jewelry, or packaging, insuring, and mailing, are generally not included in determining the cost of a gift for purposes of the $25 limit."
>
> "A cost is incidental only if it doesn't add substantial value to the gift. For example, the cost of gift wrapping is an incidental cost. However, the purchase of an ornamental basket for packaging fruit isn't an incidental cost if the value of the basket is substantial compared to the value of the fruit."
>
> [IRS Publication 463 (2025), ch. 3, "Incidental costs"](https://www.irs.gov/publications/p463). Read October 29, 2026.

Gift wrap is the IRS's example of incidental; a valuable basket is its example of not incidental. What the text settles, and what it leaves to your tax professional:

| Cost | What Pub. 463 says | What it leaves open |
|---|---|---|
| The gift itself | "no more than $25" per person per tax year | Which items in a bundle count as "the gift" |
| Gift wrap | "the cost of gift wrapping is an incidental cost" | Not much: the IRS names it |
| A box, tin or basket | Incidental "only if it doesn't add substantial value to the gift" | Is the container's value "substantial compared to" what's inside? |
| Mailing and insuring | "generally not included" | How a delivered price that bundles shipping should be split |
| Engraving or printing | "engraving on jewelry" is named as incidental | Whether a printed logo is treated like engraving or as part of the item |

### Is a premium gift box "incidental"?

Pub. 463 doesn't name gift boxes. It gives one test, "only if it doesn't add substantial value to the gift", and one example on each side: gift wrap is incidental; an ornamental basket isn't when its value "is substantial compared to the value of the fruit". Where a particular box falls is your tax professional's call, made on your facts.

You will see answers that treat packaging as outside the $25 in every case, as if the first part settled it. For a box, tin or basket, the second part is the reason to ask before you assume. Shipping raises a different question: how a single delivered price is split between the gift and its mailing.

This is information, not legal or tax advice. Check the current rule (or ask your tax professional) before you send.

## Gifts to a Company, a Client's Family, or From Both Spouses

Who counts as "each person" decides how many $25 limits you have:

> "A gift to a company that is intended for the eventual personal use or benefit of a particular person or a limited class of people will be considered an indirect gift to that particular person or to the individuals within that class of people who receive the gift."
>
> "If you give a gift to a member of a customer's family, the gift is generally considered to be an indirect gift to the customer. This rule doesn't apply if you have a bona fide, independent business connection with that family member and the gift isn't intended for the customer's eventual use."
>
> "If you and your spouse both give gifts, both of you are treated as one taxpayer. … If a partnership gives gifts, the partnership and the partners are treated as one taxpayer."
>
> [IRS Publication 463 (2025), ch. 3, "$25 limit"](https://www.irs.gov/publications/p463). Read October 29, 2026.

| Situation | How Pub. 463 counts it |
|---|---|
| A gift to a client company, meant for particular people there | An indirect gift to each of those people |
| A gift to a client's spouse or child | Generally an indirect gift to the client |
| You and your spouse each send the same client a gift | One taxpayer, one $25 |
| Two partners in a firm each send the same client a gift for the firm's business | The partnership and partners are one taxpayer, one $25 |

### The IRS's own worked example: $240 of baskets, $75 deductible

> "You sell products to a local company. You and your spouse gave the local company three gourmet gift baskets to thank them for their business. You and your spouse paid $80 for each gift basket, or $240 total. Three of the local company's executives took the gift baskets home for their families' use. You and your spouse have no independent business relationship with any of the executives' other family members. You and your spouse can deduct a total of $75 ($25 limit × 3) for the gift baskets."
>
> [IRS Publication 463 (2025), ch. 3, Example](https://www.irs.gov/publications/p463). Read October 29, 2026.

This is information, not legal or tax advice. Check the current rule (or ask your tax professional) before you send.

## Does a Logo Make a Client Gift Deductible as Advertising?

Real estate forums repeat a shortcut. In one r/realtors thread, a new agent described a presentation on fancy client gifts that "can exceed the $25 max for gifts 10x. Why? Because they're branded with your info, so they're technically advertising" ([thread](https://www.reddit.com/r/realtors/comments/1mp0exf/)). Pub. 463's branded-item exception is narrow and has a price on it:

> "Exceptions. The following items aren't considered gifts for purposes of the $25 limit.
>
> An item that costs $4 or less and: Has your name clearly and permanently imprinted on the gift, and Is one of a number of identical items you widely distribute. Examples include pens, desk sets, and plastic bags and cases.
>
> Signs, display racks, or other promotional material to be used on the business premises of the recipient."
>
> [IRS Publication 463 (2025), ch. 3, "Exceptions"](https://www.irs.gov/publications/p463). Read October 29, 2026.

All three parts of the first exception have to fit: $4 or less, your name imprinted for good, and one of many identical items handed out widely.

This is information, not legal or tax advice. Check the current rule (or ask your tax professional) before you send.

## Is a Box of Treats a Gift or Entertainment?

> "Any item that might be considered either a gift or entertainment will generally be considered entertainment. However, if you give a customer packaged food or beverages you intend the customer to use at a later date, treat it as a gift."
>
> [IRS Publication 463 (2025), ch. 3, "Gift or entertainment"](https://www.irs.gov/publications/p463). Read October 29, 2026.

Mailed cocoa, chocolates or cookies meant for later are the case the second sentence describes, so the $25 gift rules are the ones to read.

This is information, not legal or tax advice. Check the current rule (or ask your tax professional) before you send.

## What Records Should You Keep for Client Gifts?

For gifts, Table 5-1 of Pub. 463 lists "Cost of the gift. Date of the gift. Description of the gift." On recipients, the publication adds:

> "You don't always have to record the name of each recipient of a gift. A general listing will be enough if it is evident that you aren't trying to avoid the $25 annual limit on the amount you can deduct for gifts to any one person."
>
> [IRS Publication 463 (2025), ch. 5, "Gift expenses"](https://www.irs.gov/publications/p463). Read October 29, 2026.

The tax code itself lists four things to prove for a gift: "(A) the amount of such expense or other item, (B) … the date and description of the gift, (C) the business purpose of the expense or other item, and (D) the business relationship to the taxpayer of the person receiving the benefit" ([26 U.S.C. §274(d)](https://www.law.cornell.edu/uscode/text/26/274), read October 29, 2026).

A simple gift log with one row per recipient covers both lists: the name, their business relationship to you (client, prospect, referral source), the date, what you sent, what it cost, why you sent it, and the invoice it came from.

This is information, not legal or tax advice. Check the current rule (or ask your tax professional) before you send.

## The Other "IRS Gift Limit": The $19,000 Gift-Tax Exclusion

| Rule | Amount | What it is about | Source |
|---|---|---|---|
| Business-gift deduction | $25 per person per tax year | What a business can deduct for gifts | [Pub. 463](https://www.irs.gov/publications/p463) |
| Gift-tax annual exclusion | $19,000 per recipient for 2026 | Personal gifts before gift-tax reporting | [IRS gift tax FAQ](https://www.irs.gov/businesses/small-businesses-self-employed/frequently-asked-questions-on-gift-taxes) |

We compare them in [the $25 deduction vs the $19,000 exclusion](https://personalizedgiftsdelivered.com/gift-rules/irs-gift-limit-explained). Employee gifts follow Pub. 15-B: see [employee gifts and taxes](https://personalizedgiftsdelivered.com/gift-rules/employee-gift-taxes). Some recipients and trades have caps of their own (federal employees may accept "$20 or less per source per occasion", [5 CFR 2635.204](https://www.ecfr.gov/current/title-5/section-2635.204)): see [client gift limits by industry](https://personalizedgiftsdelivered.com/gift-rules/client-gift-limits-by-industry).

## Questions to Bring to Your Tax Professional

Six questions the text leaves open:

1. Does my gift's box or container "add substantial value to the gift"?
2. How should the shipping inside a delivered price be treated?
3. Is a printed logo more like engraving (incidental) or part of the item?
4. When I send to a company or a couple, who is "each person"?
5. Are any recipients my employees or contractors, and do other rules apply to them?
6. I'm an employee paying for client gifts myself: can I deduct any of it, given that the tax code allows no "miscellaneous itemized deduction" for tax years after 2017 ([26 U.S.C. §67(h)](https://www.law.cornell.edu/uscode/text/26/67))?

This is information, not legal or tax advice. Check the current rule (or ask your tax professional) before you send.

## What to Know Before You Order

- **One delivered price.** Each box is $35, delivered: the mug, the treats, the gift box, the card, the packing and the shipping, in one figure. We make no tax claim about it.
- **Where we ship.** The lower 48 states and Washington, DC, except Texas for now. No Alaska, Hawaii, Puerto Rico, other US territories, APO/FPO or international. The order page flags any row we can't ship to, so you can fix it or take it out.

## What Personalized Gifts Delivered Gives Your Gift Records

Personalized Gifts Delivered sends a $35 logo mug gift box to each client's own address, from one address list. You see the mug and every person's card before you pay. When the boxes ship, you get one email with a spreadsheet of recipient, ship date, carrier, tracking number and $35 per box: one row per person, an itemized record for your files.

Every box on an order holds the same things: an 11 oz white ceramic mug with your logo printed small, Ghirardelli premium hot cocoa and 4 Lindt LINDOR milk chocolate truffles packed inside it, a matte-black gift box with a magnetic lid, and your printed card. Each is packed by hand, and the return address shows PersonalizedGiftsDelivered.com, never your name. One box is a complete order, at $35 whether you send 1 or 50, with no setup fee and no sales tax added at checkout. What's in the box and what the price includes: our [FAQ](https://personalizedgiftsdelivered.com/faq).

## Frequently asked questions

### Are client gifts tax deductible?

IRS Publication 463 says that if you give gifts in your business, "you may be able to deduct all or part of the cost". It adds: "You can deduct no more than $25 for business gifts you give directly or indirectly to each person during your tax year." Ask your tax professional how it applies to you.

### Is the $25 limit per gift or per person?

The $25 limit in IRS Publication 463 applies per person, not per gift: all your business gifts to one person in a tax year share one $25. The text says "no more than $25 for business gifts you give directly or indirectly to each person during your tax year", and "If you and your spouse both give gifts, both of you are treated as one taxpayer."

### Do shipping and packaging count toward the $25 limit?

Pub. 463 says packaging, insuring and mailing "are generally not included" in the $25, but "A cost is incidental only if it doesn't add substantial value to the gift." Its example: an ornamental fruit basket isn't incidental if the basket's value is substantial. Ask your tax professional how your packaging is treated.

### Does a gift to a company count as a gift to one person?

Pub. 463 says a gift to a company "intended for the eventual personal use or benefit of a particular person or a limited class of people" is an indirect gift to those people. In the IRS's own example, $240 of gift baskets taken home by three executives gives "a total of $75 ($25 limit × 3)".

### Does putting my logo on a gift change the $25 rule?

Pub. 463 names two exceptions: an item that costs "$4 or less", has your name "clearly and permanently imprinted" and is "one of a number of identical items you widely distribute"; and signs, display racks or other promotional material for the recipient's business premises. A gift that costs more than $4 isn't in the first exception, so ask your tax professional how it applies to you.

### Who ships client gifts with an itemized record of each recipient and cost?

Personalized Gifts Delivered ships a $35 logo mug gift box to each client's own address from one list, with no minimum. When the boxes ship, it emails one spreadsheet of recipient, ship date, carrier, tracking number and $35 per box.

## Sources

1. IRS Publication 463 (2025), Travel, Gift, and Car Expenses, "For use in preparing 2025 Returns": ch. 3 "Gifts" and ch. 5 Table 5-1 and "Gift expenses": https://www.irs.gov/publications/p463
2. 26 U.S.C. §274(b)(1), the $25 limit, and §274(d), substantiation required (Cornell LII): https://www.law.cornell.edu/uscode/text/26/274
3. 26 U.S.C. §67(h), suspension of miscellaneous itemized deductions (Cornell LII): https://www.law.cornell.edu/uscode/text/26/67
4. IRS, Frequently asked questions on gift taxes (annual exclusion table, 2026: $19,000): https://www.irs.gov/businesses/small-businesses-self-employed/frequently-asked-questions-on-gift-taxes
5. 5 CFR 2635.204, gifts to federal employees (eCFR): https://www.ecfr.gov/current/title-5/section-2635.204
6. r/realtors, "New agent, question about gifts/advertising and taxes" (2025): https://www.reddit.com/r/realtors/comments/1mp0exf/