Making gifts to promote your business may be complicated by time, inflation, and poor tax legislation.
Laura (a client) recently asked if they could write off the cost of sending $5 Starbucks gift cards to prospects and referral sources.
According to the law, this client’s $5 Starbucks cards will be treated as business gifts.
If she gives a card to a referral source every month, her cost is $60 for the year ($5 x 12), but she may not deduct more than $25 for business gifts made to the same person. Ouch!
There is a $4 exception to the gift rules that allows you to give an item as advertising to a customer or prospect.
- That costs you $4 or less,
- On which you have your name clearly and permanently imprinted, and
- That is one of several identical items distributed generally by you.
This is absurd.
The $4 rule was enacted in 1962, years before Starbucks came into being. If you applied the consumer price index calculator to that $4 amount, it would inflate to $39 today.
Do you want to know a legal hack to avoid this rule?