How Do You Make Valentine’s Day Candy Deductible?

On December 22, 2017, President Trump signed into law the 2017 Tax Cuts And Jobs Act. It’s been a good 30 years since the last time the Internal Revenue Code received such a major update but for taxpayers who in the past looked to claim unreimbursed employee business expenses as a tax deduction, this was no sweetheart of a deal.

Major Changes From The New Law Include:

Lower Income Tax Rates For Individuals.

Increased Standard Deduction For Individuals

Elimination Of Personal Exemptions

Limitations of Deductibility Of Itemized Deductions including Mortgage Interest and State & Local Taxes.

Lower Corporation Tax Rates.

Disappearance Of Miscellaneous Itemized Deductions.

Miscellaneous itemized deductions which exceed 2% of your Adjusted Gross Income (“AGI”) will be eliminated for the tax years 2018 through 2025. This includes deductions for unreimbursed employee expenses and tax preparation expenses. To be clear, it includes expenses that you incur in your job that are not reimbursed – like tools and supplies; required uniforms not suitable for ordinary wear; dues and subscriptions; job search expenses; business travel & mileage; home office deduction; and entertainment & promotion (which includes Valentine’s Day candy).

But business owners need not worry because elimination of unreimbursed employee expenses only affects taxpayers who claim an employee-related deduction on Schedule A.  As an unincorporated business (sole proprietorship), you typically file a Schedule C to claim business expenses.  Therefore, a business owner’s business-related deductions are not affected by the elimination of Schedule A deductions.  Likewise this elimination has no impact on corporations and other incorporated entities from reporting such business-related deductions.

So How Can Businesses Make Valentine’s Day Candy Tax Deductible?

You can in fact deduct Valentine’s Day candy if you figure out a way to make it business related. The IRS doesn’t say a lot about this topic because they don’t want to give you “permission” to deduct these items, but they also have not specifically stated that you cannot deduct Valentine’s Day candy.

So here are four different ways for you to consider deducting those over-priced hearts of chocolates:

1. Make a promotion out of it by attaching your business card or a promotional flyer to the candies that are being passed out.
2. There are many companies who will print candy wrappers with your logo on it which is an even better and more advanced way to promote your business and still have something sweet for the recipient.
3. Send a box of candy to potential or existing clients during February. This promotes your business and would likely not be questioned as a business deduction.
4. Make it a party. You can deduct a portion of a Valentine’s Day party if the party is to conduct or promote business. Typically this looks like an open house of some sort where you mingle with current and potential clients, play a few Valentine’s Day games, give out candy and treats, and discuss business. The IRS does not specify how much time you must spend discussing the business to claim a deduction but you must invite people that you do business with or are looking to do business with.

Make It A Charitable Deduction.

Now the new law did not take away deductible charitable contributions so all taxpayers can consider getting a charitable deduction by donating any leftover candy to the U.S. military. Charitable organizations with 501(3)(c) status like Operation Gratitude (EIN 20-0103575) and Soldiers’ Angels (EIN 20-0583415) collect leftover Valentine’s candy to include in care packages for soldiers. They are two of many 501(c)(3) organizations on the IRS-approved list to donate tax deductible charitable goods. Always be sure to check the IRS list before claiming your donations are tax deductible, as status can change.

What Should You Do?

Like with any expense you are looking to deduct it is important to make sure that the tax law would support a deduction and that you have the required backup documentation in case you are audited by the IRS.

You know that at the Law Offices Of Jeffrey B. Kahn, P.C. we are always thinking of ways that our clients can save on taxes. If you are selected for an audit, stand up to the IRS by getting representation. Tax problems are usually a serious matter and must be handled appropriately so it’s important to that you’ve hired the best lawyer for your particular situation. The tax attorneys at the Law Offices Of Jeffrey B. Kahn, P.C. located in Orange County (Irvine), Inland Empire (Ontario) and elsewhere in California are highly skilled in handling tax matters and can effectively represent at all levels with the IRS and State Tax Agencies including criminal tax investigations and attempted prosecutions, undisclosed foreign bank accounts and other foreign assets, and unreported foreign income.