The holiday season is a good time for businesses to express gratitude to employees and customers by giving them gifts or hosting Christmas parties. However, before you start buying or sending out invitations, it's good to know if the expenses are deductible and taxable for the recipient.
Providing medical care to your employees is a wonderful holiday present if you don't have a plan in place yet. With the future of low-cost healthcare law uncertain, getting an employee plan is now a great incentive for the end of the year, and it is also a good way to write off taxes during the holiday.
This is to ensure that tax laws can be used at the end of the year. To make sure you can benefit from a personal income tax return, you need to prove that you have an appearance on the business side of the game.
Business Owners must have enough stocks and bonds in the business to prove losses on a personal tax return.
When you give gifts to customers, the gifts are deductible up to $ 25 per beneficiary per year. For purposes of the $ 25 limit, it is not necessary to include "accidental" costs that do not add substantial value to the gift, such as engraving, gift wrapping, or shipping. Brand marketing warranties, such as pens or exercise balls printed with the company name and logo, are also excluded from the $ 25 limit, as long as they are widely distributed and cost less than $ 4.
The $ 25 limit is for gifts for people. There is no set limit for contributions for a business; a gift basket that anyone can share, for example, as long as it is "reasonable."
Small businesses should defer this year's earnings to take advantage of lower rates that should be included in the new tax code. If you offer services in December and plan to get them by the end of the month, you won't get paid until the next year.
In general, any amount transferred to an employee is included in their taxable income (and therefore subject to income tax and wages) and deductible for you. However, there is an exception for cashless gifts, which constitute "additional de minimis benefits."
These are items of such low value, and it is rarely possible to manage them administratively. Common examples include festive turkeys or chickens, gift baskets, occasional sports tickets or theatre tickets (but not subscriptions), and other low-priced products.
The additional de minimis benefits are not included in an employee's taxable income but are still deductible for you. Unlike customer gifts, there is no specific limit for de minimis gifts. However, many companies use an informal deadline of $ 75.
Please note that cash gifts and cash equivalents, such as gift cards, are included in an employee's income and are subject to even small and rare deductions from wages.
The Jobs and Tax Reduction Act reduced certain deductions for business meals and eliminated the deduction for commercial entertainment. However, there is an exemption for certain recreational activities, including Christmas.
The holiday period is fully deductible (and excluded from the beneficiaries' income), provided that it mainly benefits unpaid employees and their families. If customers also participate, the parts may be partially deductible.
Traveling on vacation is a good tax cut, but not if you're visiting friends and family. However, if you intend to visit customers and business partners to talk about business plans for the New Year, these travel plans are deductible.
Reaching out and giving to those in need is things the holiday signifies, and it is also a reasonable means for a tax deduction and write-offs. The general rule of thumb is that charitable deductions go to personal, non-commercial tax returns. Be sure to distinguish between advertising giving and charitable giving.
For example, purchasing an advertisement for your business as part of the local high school vacation program may support the school, but is not eligible for tax write-offs.
CONTINENTAL TAX AND ACCOUNTING SERVICES