The $25 business gift deduction hasn't moved since 1962

It's the first week of November, and the office manager who booked her company's holiday party with you back in September is on the phone with a second order: 80 boxes of cookies for the company's customers, shipped before the holidays. Then comes the question I heard every year as a director of sales: "Can you keep each one at $25? That's what we can write off."

She's mostly right, and the way you build the quote decides how much of her spend lands on the right side of that line. The rule is federal tax law, and the $25 figure in it is older than most of the people who ask about it. None of this is tax advice; it's the published rule, and her accountant has the final word on her return.

The $25 cap is your client's, and it dates from 1962

Section 274(b)(1) of the Internal Revenue Code lets a business deduct no more than $25 of business gifts per recipient per tax year. Congress added Section 274 in a law signed October 16, 1962, and the statute still says $25 as of November 2026. It isn't indexed for inflation.

For scale, run the Bureau of Labor Statistics consumer price index and $25 in October 1962 comes to roughly $277 in September 2026 dollars. That's arithmetic on the same series behind the BLS inflation calculator, so treat it as approximate.

You'll hear that the limit is now $75, or $100. I couldn't find a law or a pending bill that says so. The last concrete proposal I found was S.1827 in 2015, which would have indexed the cap for inflation; it never passed. The 2025 tax law, the One Big Beautiful Bill Act, changed the meals rules in Section 274(o) and left the gift cap alone.

The cap limits your client's deduction, not your sale. You can still sell an $80 basket; the buyer just can't expense all of it.

The cap counts people, not boxes

The limit is per recipient per year, added up. IRS Publication 463 puts it as "no more than $25 for business gifts you give directly or indirectly to each person." Two $20 gifts to the same person in one year make a $25 deduction, not $40.

Sending the boxes to a company address doesn't get around it if they're meant for particular people. Pub 463's worked example: a seller gives a local company three gourmet gift baskets at $80 each, $240 in total, and three of the company's executives take them home. The deduction is $75, which is $25 times three. That example is where most of the "$75 limit" claims come from.

The Treasury regulation draws the line from the other side too. A gift to a company meant for a particular employee or owner is an indirect gift to that person. A gift for "some undesignated member of a large group" generally isn't, unless the recipient is reasonably easy to identify. A tray for the whole office reads differently from forty boxes with forty names on them. Which side your client's order falls on is a question for their accountant.

Two more wrinkles come up when buyers ask:

• Gift cards to clients count toward that client's $25 at face value, as far as I can read the statute. Pub 463 doesn't address gift cards directly, so that's my inference.
• Gifts to the client's own staff follow different rules. IRS Publication 15-B treats gift cards and cash equivalents to employees as wages, "no matter how little." The holiday bonus post covers that side.

Packaged food is a gift, and the box and postage aren't part of it

Two rules make food a good fit for this.

First, packaged food stays out of the entertainment bucket. When something could be either a gift or entertainment, it's generally treated as entertainment. Packaged food is one of the exceptions. Pub 463 says that if you give a customer "packaged food or beverages you intend the customer to use at a later date, treat it as a gift." That matters because entertainment has been 0% deductible since 2018. A box of cookies gets up to $25. Tickets to a game the client attends with you get nothing.

Second, incidental costs sit outside the $25. Under Treasury Regulation 1.274-3 and Pub 463, packaging, insuring and mailing generally aren't counted in the cost of the gift. Pub 463 names gift wrapping as an incidental cost.

The limit on that: "A cost is incidental only if it doesn't add substantial value to the gift." The IRS's own example is an ornamental basket for packaging fruit. If the basket's value is substantial next to the fruit, it's part of the gift. A plain shipping carton is incidental. A keepsake tin printed with the client's logo could go either way.

This is where your invoice does the work. If the food, the packaging and the delivery arrive as one number, the buyer has to reconstruct later which part was incidental. If they're separate lines, the split is already on paper.

What published gift boxes leave over the line

The bakery gift programs I looked at mostly price above $25. Here's what a few published 2026 prices leave over the cap, assuming it's the only gift that person gets from the client that year:

Greyston's corporate page lists USPS Ground shipping separately, at $8.45, $12.50 or $15.00 depending on gift value. That's the right habit: shipping on its own line generally stays outside the $25. Greyston prices its tins as finished products, with no separate number for the tin. Whether a decorative tin is incidental packaging is exactly the "substantial value" question, and when it's priced into the product, the buyer has nothing on paper to point to.

Zingerman's Winter 2026 business catalog has a whole section of gifts under $50 per recipient. A seller that size organizing its catalog that way suggests many corporate buyers start from a per-recipient budget.

So I'd build three tiers:

1. A $25 tier, where the food comes to $25 or a little under, with packaging and delivery on their own lines.
2. A mid tier in the $30 to $50 range, for buyers working to a per-recipient budget.
3. A premium tier for the buyer who's spending on the relationship and already knows the deduction stops at $25.

Don't market the first tier as "fully deductible." Whether it is depends on everything else the client gave that person that year, which you can't see.

Sales tax follows the box

When gifts ship to your client's customers, the sales tax question travels with them. Washington's sourcing statute, RCW 82.32.730, sources a sale that isn't picked up to where "the purchaser or the purchaser's donee" receives it. The donee is the gift recipient. Ship 80 boxes to 80 addresses and you may have more than one tax answer on a single order.

Food isn't automatically exempt, either. The Minnesota Department of Revenue says candy is taxable, party trays are taxable prepared food, and gift baskets with food follow the bundled-transaction rules: taxable if the taxable items are more than 50% of the purchase or sales price. The catering sales tax post covers how states treat delivery and other charges. Check yours before you quote shipping on gift orders.

Ask for the recipient list, with addresses, at booking. It does two jobs. You need it to ship and to source the tax, and Pub 463 says a general listing of recipients is enough recordkeeping when it's evident the client isn't trying to avoid the $25 limit. Return that list with the invoice and you've done part of the client's bookkeeping for them.

What published programs ask for, and when

The five gift programs I read mostly land on similar numbers:

• Programs pitched from about 10 recipients. Levain's page runs from 10 gifts to 1,000, and Greyston's custom tins carry a 10-tin minimum. Baked by Melissa is the outlier: its shipping minimum is one 25-pack.
• Volume discounts from about $1,000. Milk Bar posts 10% off bulk gifting orders of $1,000 or more. Greyston's 2026 early-order offer, for orders placed by November 17, is 15% off, or 20% off orders of $1,500 or more, or free logo customization at $3,000. The offers can't be combined and are figured on the merchandise subtotal before shipping.
• An early-order deadline. Greyston's November 17 date was the only order-by date I found on these pages.
• Longer lead times in season. Baked by Melissa needs corporate orders finalized 3 business days before arrival most of the year, and 7 business days in November and December. Zingerman's says custom gift notes are ready to ship the same day, custom pastry labels ship within a week and etched wooden crates within two.

On the carrier side, the Postal Service's recommended 2026 send-by dates for Christmas delivery in the contiguous US were reported as December 17 for Ground Advantage, December 18 for Priority Mail and December 19 for Priority Mail Express. Work backward from those, then add your production days and the time it takes a corporate buyer to approve a logo proof. If procurement has to set you up as a supplier before a purchase order goes out, start that in parallel; the vendor onboarding post covers what that involves.

What I'm not going to give you

The size of the corporate gifting market. The most-quoted US figure I traced comes from a 2022 study Coresight Research did with GiftNow, a gifting vendor. I wouldn't plan a program on it.

What restaurants make on gift programs. I found no credible source for margins or volumes on restaurant corporate gift orders.

UPS and FedEx holiday cutoffs. I couldn't confirm 2026 dates from either carrier.

What to do

1. Itemize every gift order: food, packaging and delivery as separate lines.
2. Build one tier with the food at $25 or just under, and say plainly what's in it.
3. Don't promise deductibility. Tell the buyer the cap is $25 per recipient per year and send them to their accountant for the rest.
4. Collect the recipient list with addresses at booking, for shipping, tax sourcing and the client's records.
5. Check sales tax by destination, especially on candy and mixed baskets.
6. Publish an order-by date that works backward from the carriers' send-by dates and your logo lead time.

Disclosure: I work at Katalyst, which sells catering software that generates invoices and collects deposits. Separate lines on an invoice don't need special software. They need a decision, made before the first gift order comes in, that the box and the postage are never buried in the price of the food.

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