This holiday season, don’t let taxes take away from the joy of giving! Taxes are the last thing on people’s minds during the holiday season. Unfortunately, they are not exempt during this time of year and can impact year end tax returns. Here are a few things to keep in mind regarding gifting and taxes.
Personal gifts are those given to family, friends, and others with no business association. The IRS does not tax unique gifts, regardless of the amount. This includes cash, checks, gift cards, and most valuable items. However, there can be information filing requirements. Giving someone high-value gifts or items uch as a car, boat, or house valued at more than $16,000 in a single year, may be subject to gift tax return filing requirements. If you and your spouse jointly give a gift, the total allowed is $32,000. It is essential to keep records of all personal gifts given in case you need to file a gift tax return.
Stay within the IRS limits if you’re planning to give clients or customers gifts. For business gifts, the limit is $25 per person per year. Anything above that amount is not tax deductible. Business gifts are also not deductible if they are given in cash, stocks, bonds, or mutual funds. This forces us to take a little extra time to buy that colleague something unique and thoughtful. If you are looking to send company-focused materials, you can deduct 100% of the cost of promotional items such as pens and coffee mugs. Make sure to keep receipts to ensure you receive the proper deductions.
Donating to a qualified charity is a great way to reduce your taxable income. The IRS allows you to deduct charitable donations on your tax returns. Keep receipts or other documentation so you can claim the deduction when it comes time to file your taxes.
With some planning, you can avoid any surprises come tax time. Keep these tips in mind, and have a happy holiday season!