Can You Write Off Holiday Meals and Employee Gifts? A Simple Guide for Small Business Owners

Every holiday season, business owners ask the same question.
Can I write this off?

Between team lunches, client dinners, gift baskets, and employee bonuses, it becomes hard to know which holiday expenses count as tax deductions and which will get denied by the IRS.

The good news is that holiday meals and employee gifts can be deductible when done correctly.
Here’s a simple guide to help you understand what qualifies and how much you can write off.

Holiday Meals: When You Can Deduct 100 Percent

The IRS tightened meal deduction rules in recent years, but one category remains fully deductible.

Company-wide holiday parties and meals are 100 percent deductible.

This includes:
• A holiday dinner for your entire team
• A company-wide end-of-year celebration
• An annual appreciation event where all employees are invited

Why this qualifies
Meals for the entire team fall under “employee social events,” which the IRS allows as a full deduction because they support team morale and company culture.

These events must:
• Be open to all employees
• Not be exclusive to owners or high-level staff
• Have a legitimate business purpose (team appreciation qualifies)

If you take only one or two employees out separately, that becomes a regular business meal and is only 50 percent deductible.

Regular Holiday Meals With Clients or Contractors

These are still deductible, but at a reduced rate.

Business meals with clients and contractors are 50 percent deductible.

Examples include:
• A holiday lunch with a client
• A year-end meeting over dinner
• A seasonal catch-up with a contractor

To qualify, the meal must:
• Involve business discussions
• Be ordinary and necessary
• Not be considered lavish

Keep receipts and note who you met with and why.

Employee Gifts: How Much Can You Deduct?

Employee gifts are a great way to show appreciation and they come with tax benefits when handled correctly.

You can deduct employee gifts up to 25 dollars per person each year.

This rule applies to gifts like:
• Gift cards under 25 dollars
• Holiday baskets
• Company swag
• Small appreciation items

These are considered “de minimis benefits” and are fully deductible because they are small, infrequent, and not considered compensation.

But be careful with gift cards

Gift cards are treated like cash.
If the gift card has a clear cash value, it becomes taxable compensation to the employee unless it’s for a very small amount and used only for a specific store.

If you want a simple, safe approach, keep employee gift cards under 25 dollars and treat them as de minimis.

Bigger Gifts and Bonuses

If you go above the 25 dollar limit, the gift becomes taxable compensation.

Examples
• Cash bonuses
• Gift cards over 25 dollars
• Expensive electronics or gifts

These must be added to payroll and are subject to normal payroll taxes.
The business still gets the deduction, but it must be run through payroll properly.

What About Client Gifts?

The IRS has a separate rule for client and customer gifts.

Client gifts are deductible up to 25 dollars per person per year.

The limit is strict and does not increase even if the gift costs more.

Items not counted toward the limit include:
• Shipping costs
• Engraving
• Wrapping
• Business promotional items under 4 dollars with your logo (these are fully deductible)

How to Stay Compliant and Avoid Issues

To safely deduct holiday meals and gifts, follow these guidelines:
• Keep all receipts
• Track who attended the meal or received the gift
• Record the business purpose
• Keep your bookkeeping up to date
• Avoid mixing personal and business spending

Good documentation protects your deductions if the IRS ever asks questions.

Final Thoughts

Holiday meals and employee gifts can be fully or partially deductible, but only if you follow the IRS rules.
A company-wide holiday meal can be written off completely.
Employee gifts have strict limits.
Client gifts require careful tracking.

If you want to get the most tax savings without risking disallowed deductions, clean bookkeeping and proper documentation make all the difference.

Red Leaf Bookkeeping can help you stay organized and tax-ready all year long.

👉 Book a Money Clarity Call and get your books holiday-ready the easy way.