If the nature of your job requires you to give gifts to customers, the cost of gifts given directly or indirectly to a customer is deductible up to a maximum limit. The following rules apply to gifts:
• You cannot claim a gift deduction of more than $25 per person. (Incidental costs, such as engraving on jewelry, or packaging and mailing, are not included in determining the cost of the gift).
• A gift to a customer’s family member is considered an indirect gift to that customer.
• If both spouses give gifts, they are treated as one taxpayer with one $25 limit per customer.
• Items costing less than $4, and used for promotional purposes, such as pens, key chains, mugs, etc., with the business name clearly imprinted, are not included in the $25 limit.
An item that could be categorized as either a gift or an entertainment expense is generally considered to be an entertainment expense, and hence subject to the 50% deduction rule.
Local Transportation Expenses
You can deduct the ordinary and necessary costs of business-related transportation expenses incurred within the area of your tax home. Transportation expenses include the cost of transportation by air, rail, bus, taxi, etc., and the cost of driving and maintaining your car. This following transportation costs are deductible:
• Traveling from one workplace to another.
• Traveling to visit clients.
• Traveling to a business meeting away from your workplace.
• Traveling from home to a temporary workplace, if you have more than one regular workplace.
Commuting expenses are never deductible, and include the following:
• Traveling between your home and your regular place of business.
• Parking fees incurred at your regular place of business.
• Traveling from a union hall where you get your assignment, to your place of work.
The primary objective of this article is to empower taxpayers to learn to do their own taxes. For detailed information on how to deduct your employee business expenses, grab yourself a copy of “Doing Your Own Taxes is as Easy as 1, 2, 3” ($6.98) on TaxConnections.com.