Advertising and Promotional…..Can I write it off?

Business owners in your breakfast club are donating to it. They asked you to pitch in. It’s a charitable fundraiser for someone you’d like to support. They’re not a 501(c)(3) charitable organization, but surely it can be a business expense. Networking? Goodwill?

Not so much. At least not by IRS standards.

Crowdfunding can be a great boon for individuals-in-need, but if the individuals are not designated 501(c)(3), no matter how charitable you’re feeling, they’re not tax deductible.

But there are ways you can be generous in your community and still benefit from tax deductions. Here are examples of frequent topics discussed with our Be Square clients on the ins & outs of paying it forward.

Donations/Sponsorships:

o   Niece’s soccer team sponsorship with your nifty logo on the jerseys. Check. 100% deductible promotional expense.

o   Friend’s theatre group donation with your nifty logo in the program. Check. 100% deductible promotional expense.

o   Flower arrangement for a business colleague’s father’s funeral. No. Business colleague-related condolences are not deductible because they’re not considered an expense for the production of business income.  

Business Gifts:

o   Client Appreciation Gift. Check. 100% deductible promotional expense, as long as the item is permanently branded with your business logo or information.

o   Gift for a friend who’s not a likely client. No business branding, but you stuck your business card in the package. Questionable deduction. The IRS allows gifts in the course of business, but in an audit, you might have to explain how your friend’s gift constitutes potential business.

o   Employee Gift. Create goodwill, and maybe they’ll be a client one day, right? No, not promotional, though you can expense employees gifts, as long as the expensed portion does not exceed $25 per person per year.*

Entertainment:

o   While the IRS used to allow entertainment expenses directly related to conducting business, generally, entertainment is no longer tax deductible.

o   There are a few exceptions. For instance, if they’re expenses for an employee holiday party, that’s usually 100% tax deductible. Or if they’re expenses connected to attending business meetings, and sometimes conventions, as long as they’re related to exempt groups like business leagues and professional organizations, they’re often considered deductible.

Not a Be Square client? Contact Us to set up a free introductory call to find out if we’re a good fit for your bookkeeping and payroll needs.

*Per the IRS, some expenses above the $25 business gift limit are still deductible. If the gift costs $4 or less and is branded with your business name, it can be a business expense as long as it’s something you regularly distribute. Also, minor incidental charges connected to these gifts, like packing, shipping and engraving are deductible. Make sure you keep good records that note the cost and purpose of these gifts.

In addition, flowers, entertainment tickets and other occasional “de minimis” expenses for employees are deductible up to $100 total per year. Gift amounts are included in this $100 total. Make sure you keep good records that note the cost and purpose of these gifts.

Note: Cash and cash equivalents are generally considered wages, not de minimis benefits. But occasional cash provided for a meal or transportation so the employee can work overtime can be considered in the $100 de minimis fringe benefits.