Can a business owner write off promotional giveaways?

Forum|Forum|6 years ago
June 1, 2019
3 replies
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The last time this question was asked was 5 years ago. If a business owner gave away a promotional gift (e.g., a gift card, merchandise, etc) to drive business (requiring the applicants of the giveaway to like, share, subscribe, etc. to our page or something like that), is this deductible?

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Best answer by MichaelL1

Yes, you can deduct promotional give aways as advertising expense of the business.

It meets the definition of IRC 162, ordinary and necessary business expense.

Now, say for example you run an ice cream shop and your promotion is an extra scoop of ice cream. That ice cream is already included in the purchases that goes into the Cost of Goods Sold (COGS), so while it can be deducted, it already is.

Now if the same ice cream shop gives away a $5 card to a hardware store, that is deductible and can be deducted as it not already in the COGS.

MichaelL1Answer

Employee

Yes, you can deduct promotional give aways as advertising expense of the business.

It meets the definition of IRC 162, ordinary and necessary business expense.

Now if the same ice cream shop gives away a $5 card to a hardware store, that is deductible and can be deducted as it not already in the COGS.

bluestar127

If you purchased the item that you were giving away, would you deduct the cost that you paid for it or the retail value that you would sell it for (if you had sold it instead of giving it away) for that giveaway item?

smtuschen

Is the giveway of a store giftcard (to the same business) deductible?

JotikaT2

Yes.

It could be classified as an advertising expense to promote your business.

Business expenses

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cwilliambrown

Would greatly appreciate help with a similar question.

We gave away several gift certificates at a promotional event held onsite, catered and open to the public. The prizes we gave away were gift certificates for use in our business (Salon and Spa). Can I deduct the full value (what we charge for the service)? If not, what portion is deductible?

mdsd7712

I have a question regarding the value of a giveaway for promotional purposes.

If the item is purchased NEW then demonstrated before the giveaway, it becomes used.

(in this case it is cordless power tools)

what value would one place on the used item for deduction? would it still be the full cost value to deduct?

(the giveaway recipients do know this is the case, that the tool they win will be tested and videotaped before the item is sent)

and

on the otherside, does the “winner” need to declare the value of the item they won on their taxes?

Critter-3

The incidental use for demonstration purposes would not reduce the cost of the item unless you use it for like a year for demonstration purposes then the value of the item would be reduced by the depreciation of the asset.

So if you buy it for $100 and demonstrate it once then the cost of the giveaway is $100.

If the value (cost or you or depreciated cost) is $400 or more you need to give the "winner" a 1099-misc for the value of the item or a W-2G if the winner put money into the contest and they need to report it on their return.