Holiday Tax Deduction Myths: Sorting Fact from Fiction

The holidays are a time for gratitude, gravy, and gathering—but for tax professionals, they also bring a hearty serving of deduction-related questions. While your Aunt Donna’s legendary stuffing isn’t deductible (no matter how many clients you invite), some Thanksgiving and holiday expenses can have tax implications.

From charitable giving to client meals and employee parties, the season offers a perfect opportunity to talk tax strategy—especially when clients are feeling generous. So let’s go ahead and pass around the mashed potatoes and the tax advice.

Below are common questions clients raise around holiday meals, parties, and gifts—and the rules that actually apply.

Meals, Parties, Entertainment, Food, and Employee Events

Myth #1:  I hosted Thanksgiving for my clients. That’s a write-off, right?

Not quite. The IRS is strict about meal and entertainment deductions. If you hosted a dinner primarily for business purposes—say, a client appreciation event—you might be able to deduct 50% of the meal costs, but only if it meets the “ordinary and necessary” test and proper documentation is kept. A family-style feast with a few business cards on the table? Probably not.

Myth #2: I purchased a turkey and donated for the local shelter. That’s a charitable deduction, right?

True! Donating food, supplies, and/or money to qualified 501(c)(3) organizations are deductible if you itemize on your tax return. Be sure you get a receipt or keep records of the purchase. And no, giving your leftovers to your neighbor doesn’t count.

Myth #3: I drove 20 miles to volunteer at a soup kitchen. Can I deduct the mileage?

Yes! The IRS does allow a deduction of 14 cents per mile for charitable driving (as of 2025). It’s not much, but it can add up especially if you are a volunteer. You should keep a log of the trips along with the purpose.

Myth #4: I bought a new outfit for Thanksgiving dinner. Business casual counts, right?

Nice try. Clothing is only deductible if it’s required for work and not suitable for everyday wear. Unless your Thanksgiving outfit is a branded uniform or costume for a performance, it’s not deductible—even if it’s really festive.

Myth #5: I gave my employees gift cards for Thanksgiving. That’s a deductible expense!

Yes—but with caveats. De minimis fringe benefits like small turkeys or pies may be excluded from income. However, cash or cash equivalents similar to gift cards are generally taxable to the employee and must be reported on the W-2s. Employers can still deduct the cost, but it’s not tax-free for the recipient.

Myth #6: I hired Santa for my office party. That’s a business expense!

Possibly! If the party is primarily for employees (not clients), the cost of entertainment—including hiring Santa—can be 100% deductible as an employee benefit. Just make sure it’s not lavish or extravagant. And yes, Santa must invoice you.

Myth #7: Holiday gifts under $25 are always deductible.

Yes! The IRS does allow a deduction for business gifts which is limited to up to $25 per recipient annually. However, that doesn’t include incidental costs such as wrapping or shipping expenses. So, if you splurged on fancy ribbon, don’t count it towards the $25.

Myth #8: I can deduct my ugly Christmas sweater—it’s for the office party!

Nice Try! Unless your sweater is a required uniform or branded with your company logo and not suitable for everyday wear (and let’s be honest, some are very everyday), it’s not deductible even if it lights up.

Myth #9: I donated candles to my church for Hanukkah. That’s deductible.

Yes! If the church is a qualified 501(c)(3) organization, and you keep records. But personal gifts to individuals or non-qualified organizations don’t count. Religious giving must meet IRS charitable standards.

Myth #10: I hired a cleaning crew after my holiday party. That’s deductible!

Possibly! If the party was for employees and held at your business location, cleanup costs may be deductible. If it were at your home, would it be mostly personal? Nope. The IRS doesn’t care how messy your carpet got.

Myth #11: I dressed up as Santa for a client event. Costume = deduction!

Possibly! Costumes used exclusively for business (e.g., performances, promotions) may be deductible. But if you wear it again for personal use—or it’s just for fun—it’s not.

Myth #12: I gave my clients a tax-themed calendar. That’s marketing, right?

Yes! Promotional items with your branding (like calendars, pens, mugs) are generally deductible as advertising expenses. Just don’t include a coupon for free tax prep unless you want to track that too.

Myth #13: I took my top client out for a holiday dinner. Full deduction!

Nope. Post-2017 tax law changes eliminated most entertainment deductions. Meals may still be 50% deductible if related to business, but the fancy jazz club afterward. That’s on you.

Myth #14: I catered a holiday lunch for my staff. That’s 100% deductible!

Yes! Meals that are provided for the convenience of the employer such as on-site lunches or for employee appreciation are generally 100% deductible. Keep in mind you don’t want to mix in client entertainment, or it gets messy.

Gifts, Tangible Items, Cards, Decorations, and Client Giveaways

Myth #15: I gave my assistant a $100 gift card. That’s a tax-free bonus!

Nope. Gift cards are considered cash equivalents and must be included in the employee’s wages. You can deduct the cost, but it’s taxable income to the recipient.

Myth #16: I can deduct my Christmas tree—it’s in my home office!

Only if your office is exclusively used for conducting business such as if it’s in the backdrop for client Zoom calls, etc. Otherwise, it’s just festive holiday decor.

Myth #17: I painted a holiday mural on my office wall. That’s a business expense!

Yes! If it’s part of branding or client experience. Artistic upgrades to business property may be deductible as improvements.

Myth #18: I served eggnog at my client mixer. That’s a full write-off!

Yes, but it’s limited. Only 50% of food and beverage costs are deductible if related to business. And yes, even if it’s spiked.

Myth #19: I gave toys to my clients’ kids. That’s a business gift!

Gifts to individuals not directly tied to business may not qualify. Stick to gifts for the actual client or their business.

Myth #20: I taught a holiday-themed tax seminar. My costume is deductible!

If the costume is used solely for the seminar and is not suitable for everyday wear, it may be deductible. Bonus points if it’s a tax-themed elf.

Myth #21: I hosted a virtual holiday party. Zoom subscription = party expense?

Zoom or other platform costs are deductible as business utilities, but not specifically as entertainment unless tied to employee appreciation.

Myth #22: I gave my accountant a fruit basket. That’s a business expense!

Yes! If it’s under the $25 threshold and for business purposes. However, if it’s a personal thank-you that would not deductible.

Myth #23: I bought tax-themed holiday cards. That’s marketing!

Correct! Branded or promotional cards sent to clients are deductible as advertising. Just don’t include personal messages only.

Myth #24: I baked cookies for my clients. Ingredients = deductible?

Possibly, if it is part of a business promotion. Keep in mind homemade gifts can be a little tricky—you should document the intent on the recipients carefully.

Myth #25: I installed holiday lights on my storefront. That’s a business improvement!

Yes! Exterior decorations for a business location may be deductible as advertising or maintenance.

Myth #26: I hired carolers for my office lobby. That’s entertainment!

Possibly! If it’s for employees, it may be deductible. For clients? Likely not, due to post-TCJA entertainment deduction limits.

Myth #27: I sent e-gift cards to clients. That’s a write-off!

Yes, but remember the $25 gift limit per client. And it must be for business—not personal—reasons.

Myth #28: I donated a Christmas ham from my farm. That’s a charitable deduction!

Yes, if donated to a qualified organization. Fair market value of the ham is deductible, not your retail price.

Compensation & Miscellaneous Business Expenses

Myth #29: I gave my team a paid day off for the holidays. That’s a fringe benefit!

Paid time off is part of compensation and deductible as wages. It’s not a separate fringe benefit, but still a valid expense.

Myth #30: “I made a holiday-themed tax meme. That’s marketing!”

Yes, if posted on your business social media! Content creation for marketing is deductible—even if it’s hilarious.

Bonus Section: Holiday Tax Triggers for Practitioners

Encourage your clients to use the holidays to:

• Review flexible spending accounts (FSAs) before year-end deadlines.
• Make last-minute charitable donations for itemized deductions.
• Use up business expenses before the calendar flips.
• Evaluate income timing for tax bracket management.
• Gift appreciated assets to family or charities for strategic giving.

Bonus Tip: Use Thanksgiving as a Tax Planning Trigger

The holiday season is more than just turkey, gifts, and tinsel—it’s a great opportunity to help your clients make smart year-end tax decisions. You can use Thanksgiving as a conversation starter to remind them of the following;

• Review charitable contributions to ensure they’re maximizing deductions and supporting qualified organizations.
• Max out retirement contributions to IRAs, 401(k)s, or other retirement accounts before year-end.
• Harvest capital losses to offset gains and reduce taxable income.
• Explore gifting strategies for estate planning, such as gifting appreciated assets or using the annual exclusion.

Keep this checklist handy as you guide clients through their year-end planning decisions.

By Jill Kenady
Tax Materials Specialist, U of I Tax School