Company swag refers to promotional items customized with a company’s logo or message, ranging from simple items like pens and mugs to more premium items like tech gadgets. Swag serves as a marketing tool to increase brand recognition and loyalty. Whether used at trade shows, product 

launches, or for employee gifts, custom printed swag items is an effective way to keep your brand top of mind.

85% of people who receive promotional products remember the brand, which makes swag a smart marketing investment. To maximize its impact, select items that resonate with your audience. For instance, a tech company might choose USB drives, while an eco-conscious brand may prefer tote bags or sustainable products.

At Promotional Product Inc, we help businesses choose custom swag that fits their budget and goals. We offer everything from tech items to eco-friendly products. Check out our blog post to learn why custom swag is important for small businesses. Checkout our blog post on why custom promotional products are essential for small business success.   

When it comes to company swag, understanding the tax implications and potential deductions is crucial for businesses looking to maximize their marketing efforts while staying compliant with tax regulations. Let's dive into the key aspects of company swag taxation and deductibility.

Is Company Swag Worth It?

Absolutely. Branded merchandise also know as comany swag is more than a giveaway—it’s a tool for building connections and boosting brand awareness. Research shows that 82% of recipients develop a more favorable view of a brand after receiving its swag. This leads to better customer loyalty and brand engagement.

A small tech company handed out branded USB drives at a conference. This simple swag boosted their brand’s visibility and led to a 20% increase in follow-up calls from potential clients. This shows how useful, high-quality swag can help people remember your brand and choose your business in the future.

Think of it as an investment in your relationships. Every time someone uses a branded mug or tech gadget, your brand becomes a part of their daily routine, increasing the likelihood that they’ll remember and engage with your business. The key to making swag worth it is choosing quality, useful products that reflect your brand values. When done right, the return on investment (ROI) can be significant.

Tax Deductions for Company Swag

Tax deductions reduce the amount of money a business has to pay in taxes. When a small business buys things like company swag (pens, mugs, or other branded items), they can often deduct part of the cost from their taxes.

Here’s how it works:

 - You spend money on gifts or swag for clients and employees.

 - You report the cost of these items when filing taxes.

 - The government lowers your taxable income, which means you pay less in taxes.

Tax Deductions for Client and Customer Swag

 - Businesses can deduct up to $25 per person per year for gifts to clients or customers.

 - Only tangible items qualify for this deduction. Cash, gift cards, or other cash equivalents are not eligible.

 - The $25 limit applies per client, not per gift. So if you're gifting to a business with multiple people, you can deduct up to $25 for each person.

Additional Considerations

Incidental costs, like engraving, packing, or shipping, don’t count toward the $25 deduction limit, provided they don’t significantly add to the gift's value. Small promotional items under $4, such as pens or USB drives with your company logo, that are given out regularly are also exempt from this limit. However, if a gift could be classified as both entertainment and a gift, it should be reported as entertainment, meaning it won’t be eligible for deduction.

Record Keeping

It's crucial to keep detailed records of all gifts and promotional items given to clients and customers. For each gift, document:

1. The cost
2. A description of the gift
3. Date of purchase
4. Date given
5. Recipient's name and business relationship
6. Reason for giving the gift

3 Easy Tips to Follow

1. Consider giving multiple small gifts throughout the year instead of one large gift to maximize your deductions.
2. Utilize promotional items under $4 with your company logo, as these don't count towards the $25 limit.
3. When possible, combine client gifts with business meals, as you can deduct up to $25 per attendee for business meals.

By following these 3 simple tips, you can make the most of your client and customer swag while staying compliant with tax regulations. Remember, tax laws can change, so it's always advisable to consult with a tax professional for the most up-to-date advice.

Swag for Employees

Non-cash gifts valued at less than $75 are typically not taxable to employees. These are considered de minimis fringe benefits, which refer to small, occasional items given to employees that are not subject to taxation. Common examples include:

 - Snacks, coffee, or doughnuts provided occasionally

 - Tickets to entertainment events

 - Small holiday gifts with a low market value

 - Occasional personal use of company equipment

However, it’s important to note that cash gifts or cash equivalents like gift cards are always considered taxable income to employees, regardless of the amount.

Employee Award Tax Rules

The IRS allows up to $1,600 per year in non-cash awards for employees, like prizes for doing a great job. These awards can include holiday gifts, employee-of-the-month prizes, or safety awards. Be sure to follow specific IRS rules if giving out awards for length of service or safety achievements.

Tax Deductions for Employers

Employers can benefit from specific tax rules regarding business gifts and employee swag. Here’s a breakdown:

 - Business Gift Deduction: Employers can deduct up to $25 per recipient per year for business gifts, whether given to clients or employees. Keep in mind that this limit applies to gifts, not promotional items.

 - Non-Cash Employee Gifts: Non-cash gifts that are valued at under $75 can generally be deducted as a business expense without being counted as taxable income to the employee.

 - Gift Cards: The full value of gift cards given to employees can be deducted, but these must be reported as taxable wages to the employee, as they are treated as cash equivalents.

 - Incidental Costs: Expenses such as engraving, packing, or shipping a gift do not count toward the $25 deduction limit if they don’t add substantial value to the gift itself.

Key Considerations

 1. Gifts Over $100: If the value of a gift exceeds $100, even if it’s in the form of swag or a gift basket, it may be subject to taxation as compensation.

 2. Record-Keeping: Employers should maintain detailed records of gifts, including the recipient’s name, the value of the gift, and the occasion for which it was given. This documentation can help when calculating deductions or reporting taxable gifts.

 3. IRS Treatment May Vary: The tax treatment of a gift can vary based on its type, frequency, and value. Even if you intend for a gift to be non-taxable, the IRS may classify it as compensation under certain circumstances.

For specific tax situations or complex cases, it’s always advisable to consult a tax professional. This ensures that your company remains compliant while making the most of available deductions.For expert guidance on tax-related matters, be sure to check out the IRS's advice on choosing a tax professional.

Additional Resources for Compliance

dFor further clarification, refer directly to the IRS guidelines on fringe benefits. Staying informed on the latest IRS rules will help you ensure that you provide gifts and swag appropriately without unintentionally incurring taxes.Understanding the tax rules ensures that you can maximize deductions while staying compliant with IRS regulations.