Bonuses, Gifts & Holiday Parties: What’s Deductible and What’s Not
Monday, November 03, 2025
The holidays are a time to celebrate your team, thank your clients, and spread a little cheer. But before you go dashing through the snow with your business credit card, it’s important to know what the IRS considers deductible and what’s just festive fun on your dime.
Here’s a cheerful breakdown to keep your holiday spending tax-smart:
Employee Bonuses
- Deductible? ✅ Yes! Cash bonuses to employees are considered taxable wages, meaning they’re deductible to the business. Just remember they’re also subject to payroll taxes.
- Not deductible? ❌ Gifts of cash or gift cards are always treated as taxable wages (not de minimis), so they don’t get a free pass.
Festive Tip: A holiday bonus can be a great morale booster and a deduction if handled correctly through payroll.
Employee Gifts
- Deductible? ✅ Yes, with limits. Small, “de minimis” gifts (like a fruit basket, a bottle of wine, or company swag) are deductible and generally not taxable to employees.
- Not deductible? ❌ Lavish gifts or anything with significant cash value could be considered compensation and must be taxed accordingly.
Festive Tip: Think thoughtful, not extravagant. A personalized gift often means more than a pricey one.
Holiday Parties
- Deductible? ✅ Yes, if the whole team is invited. Office holiday parties are 100% deductible when they’re for the benefit of employees.
- Not deductible? ❌ Exclusive events for just owners or highly-compensated employees don’t qualify. Client-only parties typically fall under the 50% meals/entertainment rule or may not be deductible at all.
Festive Tip: Invite everyone, keep it inclusive, and your holiday cheer doubles as a tax deduction.
Client Gifts & Entertainment
- Deductible? ✅ Yes, up to $25 per client, per year.
- Not deductible? ❌ Entertainment is not deductible (sorry, no tax write-off for that courtside NBA ticket). Meals with clients may qualify for a 50% deduction if directly related to business discussions.
Festive Tip: Pair a modest client gift with a handwritten card. It leaves a lasting impression without busting IRS limits.
The Bottom Line
The IRS may not hand out candy canes, but they do allow certain holiday expenses to be deducted, if you follow the rules. Bonuses through payroll, modest employee gifts, and inclusive holiday parties are all deductible ways to spread cheer. Lavish gifts or client entertainment? Not so much.
At J&S Accounting, we help business owners navigate the fine print so you can stay festive and financially smart. Have questions about what qualifies? Contact us today before you start decking the halls.
About J&S Accounting
At J&S Accounting, we provide expert bookkeeping services tailored to the unique needs of small businesses and non-profits. We recognize the challenges that come with maintaining accurate financial records and how vital this is for the smooth operation and growth of your business. As a woman and minority-owned firm, we’re proud to offer our expertise to businesses in Savannah, GA, and across the nation, helping them navigate financial complexities and achieve better financial management.
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Disclaimer:This content is for information purposes only and should not be considered legal, accounting, or tax advice, or a substitute for obtaining such advice specific to your business from a professional accountant. Additional information and exceptions may apply. Applicable laws may vary by state or locality. No assurance is given that the information is comprehensive in its coverage or that it is suitable in dealing with a customer’s particular situation. J&S Accounting does not have any responsibility for updating or revising any information presented herein. Accordingly, the information provided should not be relied upon as a substitute for independent research. J&S Accounting does not warrant that the material contained herein will continue to be accurate, nor that it is completely free of errors when published. Readers and viewers should verify statements before relying on them.
© 2023 J&S Accounting. All Rights Reserved.
Disclaimer
This content is for information purposes only and should not be considered legal, accounting, or tax advice, or a substitute for obtaining such advice specific to your business from a professional accountant. Additional information and exceptions may apply. Applicable laws may vary by state or locality. No assurance is given that the information is comprehensive in its coverage or that it is suitable in dealing with a customer’s particular situation. J&S Accounting does not have any responsibility for updating or revising any information presented herein. Accordingly, the information provided should not be relied upon as a substitute for independent research. J&S Accounting does not warrant that the material contained herein will continue to be accurate, nor that it is completely free of errors when published. Readers and viewers should verify statements before relying on them.