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Holiday Gifting and Entertainment: What’s Deductible for Lawyers?
Avoiding Tax Mistakes While Celebrating the Season
As the holidays approach, law firm owners everywhere are planning client gifts, team dinners, and end-of-year celebrations. But here’s the big question:
What can you actually deduct—and what will the IRS flag as a red flag?
The line between generous and deductible isn’t always clear, especially with constantly changing rules about meals, entertainment, and gifting. If you want to finish the year strong and stay compliant, this guide will show you what you need to know.
Let’s make sure your generosity supports your tax strategy—not sabotages it.
Client Gifts: A Little Goes a Long Way (for Deductions)
Yes, you can deduct gifts for clients—but the IRS has limits. According to IRS Publication 463, the deduction is capped at $25 per person, per year.
That means:
- A $20 leather notebook with your firm’s logo?
Deductible. - A $100 gift basket? Only $25 of it is deductible.
- Tickets to a game or show?
Not deductible under gift rules—see entertainment rules below.
Tip: Branded swag (pens, mugs, notepads) is considered advertising—not a gift. These may be fully deductible under marketing expenses.
Meals and Entertainment: The 50% Rule (and What Changed)
The IRS allows a 50% deduction for meals under specific business-related circumstances.
Here’s what qualifies:
- Team holiday dinner at a restaurant: 50% deductible if it’s for staff appreciation
- Client meal with a clear business purpose: 50% deductible if you discuss business
- Office holiday party for all employees: 100% deductible (if it’s not exclusive)
- Entertainment (concerts, sports events): Generally non-deductible since the 2018 tax reform
Reminder: You must document the business purpose, attendees, and date/location of the meal. No receipt? No deduction.
Staff Gifts and Bonuses: Treat with Caution
Employee gifts are deductible—but be careful how you give them.
What’s deductible:
- Non-cash holiday gifts under $100 (e.g., wine, gift cards, custom baskets)
- Gift cards may be deductible, but they are considered taxable income to the employee unless handled carefully
- Cash bonuses are wages and subject to payroll tax
Not deductible:
- Lavish personal gifts with no business purpose
- Gifts to friends or family not tied to your business
Best Practice: Include cash or gift cards as W-2 wages so they’re tax-compliant for both you and your team.
Holiday Parties: Make It Count (and Make It Deductible)
An office holiday party is one of the few fully deductible events under IRS rules—if it’s for all employees and not just leadership.
To keep it compliant:
- Invite everyone, even remote team members
- Don’t host it at an exotic location or limit it to VIPs
- Save the receipts and list of attendees
Client entertainment parties? Not deductible unless there’s a clear business discussion and documentation.
Not deductible unless there’s a clear business discussion and documentation.
Avoid These Common Lawyer Mistakes:
- Assuming everything holiday-related is deductible: IRS scrutiny increases in Q4—don’t guess.
- Missing receipts or business purpose notes: No paper trail = no deduction.
- Mixing personal and business gifting: Gifts to friends/family who aren’t clients or employees? Not deductible.
Quick Holiday Tax Compliance Checklist:
- Limit client gifts to $25 per recipient
- Document all business meals (who, when, why)
- Include staff bonuses as wages on payroll
- Throw inclusive holiday parties for a 100% deduction
- Avoid claiming entertainment-only expenses
Strategy Over Surprises
Every holiday season, lawyers leave deductions on the table—or worse, claim things they shouldn’t. And when tax season rolls around, the penalties for misclassification aren’t worth it.
That’s why law firms we work with at Prestige Accounting & Consulting don’t guess. We give them a clear roadmap of what they can deduct, how to document it, and how to close the year strong.
Want to make sure your holiday generosity doesn’t create a tax headache?
