The holiday season is generally quite expensive for both businesses and individuals. There are great opportunities to communicate appreciation to your employees during the holiday season, but they can add up quite quickly. Between managing holiday gifts and parties as well as your end of the year expenses, your business can easily feel strapped financially before it is time to take down your tree. At Fricke & Associates, LLC, we want to help your business save money without having to be a Scrooge to your employees. Through write offs, you may be able to recuperate some of your money from your holiday expenses:
- Company Christmas Party—Events for your staff are incredibly valuable for teambuilding as well as morale in general. Your holiday party can be a great opportunity to throw a fun event for your employees and their families. When a party is for your employees and their families, it is 100% tax deductible. Obviously, you need to document your expenses and keep them reasonable, but you can still create a nice occasion tax-free. Make sure to include your entire staff and not just cater to the upper level because that could cause HR violations.
- Gifts—There is a law which prohibits writing off more than $25 per individual. Obviously, there will be many occasions that you will want to gift more than that whether to employees, clients, or business partners. There are a few ways to get around this rule to give more generously while still getting a good deduction:
- Company vs. Individual—The rule applies to gifts given directly or indirectly to an individual. If you can give a gift to the company as a whole instead of individuals, you can write off the gift 100%.
- Spousal Gifts—If you are giving a gift to a couple, you can increase the write off limit to $50.
- Direct vs. Incidental—If you choose to give your employees an engraved watch, the $25 limit only applies to the cost of the item. You can write off the engraving and shipping cost at 100%.
- Entertaining Experiences—Entertainment expenses are 50% deductible so you could gift an experience worth more than $25 and get to write off the expense at 50%. For example, if you gift your employees a pair of tickets to the aquarium, you can write off the expense at 50%. There are so many reasons experiential gifts truly are the best.
- Christmas Event for Networking—If you are planning a holiday party where you will invite clients, business owners, or potential clients, you can write off your expenses at 50%. The only stipulation is that you must have a serious business discussion at some point during the event.
The most important step when planning for your deductions is to document everything. You could end up in trouble with the IRS if you claim deductions without proper documentation. If you need more information about holiday deductions, your friends at Fricke & Associates, LLC are standing by to help you embrace the season of giving while maximizing your deductions.