How you categorize greeting cards for business taxes depends on who receives them and why. Cards sent as gifts to clients or vendors fall under the $25-per-recipient deduction cap in Section 274(b). Cards printed with your logo and mailed in bulk are advertising, with no per-person limit. Cards given to employees are usually a tax-free de minimis fringe benefit. Cards used inside the office are ordinary supplies. And cards a business holds for resale are inventory. Picking the right bucket changes both how much you can deduct and when you can deduct it.
Client Gifts and the $25 Per-Person Cap
When a business sends a greeting card to a client, vendor, or other outside contact as a standalone gesture, the cost falls under Internal Revenue Code Section 274(b). That section caps the deduction for business gifts at $25 per recipient per year.1Office of the Law Revision Counsel. 26 USC 274 – Disallowance of Certain Entertainment, Etc., Expenses The limit has never been indexed to inflation, so it is still $25.
A greeting card by itself rarely tests that ceiling. The cap matters when a card accompanies something more expensive, or when the same recipient receives multiple items across the year. A few carve-outs soften the rule:
- Incidental costs are excluded from the $25 calculation. Postage, envelopes, gift wrapping, and shipping are deductible separately and do not eat into the per-person limit.2Internal Revenue Service. Publication 463, Travel, Gift, and Car Expenses
- A card tucked into a gift basket or attached to another present is treated as an incidental cost, not a separate gift, as long as the card itself does not add substantial value.2Internal Revenue Service. Publication 463, Travel, Gift, and Car Expenses
- Branded items costing $4 or less are not counted as gifts at all under the statute if your business name is permanently printed on them and they are distributed broadly as identical units.1Office of the Law Revision Counsel. 26 USC 274 – Disallowance of Certain Entertainment, Etc., Expenses
That last carve-out is where most holiday mailings actually live.
When Cards Count as Advertising Instead
A card with your company logo, printed in volume, costing under $4 per unit, and mailed to your full contact list is not a gift under Section 274. It is promotional material. That reclassification moves the expense out of the capped gift category and into advertising, which is fully deductible with no per-person ceiling.
The line the IRS draws is between an individual gesture and a broad promotional distribution. A handwritten card to your top client with a personal note reads as a gift. Five hundred identical logo cards going to everyone in your CRM read as advertising. If your holiday mailing looks like the second scenario, book it as advertising or marketing and drop the per-recipient tracking. The category matches what the mailing actually is, and it usually produces a larger deduction.
Cards for Employees
Greeting cards given to workers for holidays, birthdays, or personal milestones are generally a de minimis fringe benefit. The IRS defines a de minimis benefit as property or a service so small in value that accounting for it would be unreasonable or impractical.3Office of the Law Revision Counsel. 26 USC 132 – Certain Fringe Benefits Publication 15-B specifically lists holiday or birthday gifts, other than cash, with a low fair market value as an example of a qualifying de minimis benefit.4Internal Revenue Service. Publication 15-B, Employer’s Tax Guide to Fringe Benefits
The card is not taxable income to the employee, no withholding is triggered, and the employer deducts the cost as an employee relations expense. Even a card paired with a small non-cash item like candy or flowers usually stays inside the de minimis line.
One rule breaks the pattern hard: cash and cash equivalents are never de minimis, no matter how small. A $5 gift card slipped inside a greeting card is taxable compensation to the employee and has to be added to wages and withheld on.4Internal Revenue Service. Publication 15-B, Employer’s Tax Guide to Fringe Benefits The card by itself is fine. The gift card inside it turns the whole gesture into payroll.
Internal Office Use
Not every card sent inside a business is a gift or a marketing piece. A sympathy card circulated among coworkers, a welcome card for a new hire, a get-well card signed by the team: these are ordinary office supplies. The full cost is deductible as a routine business expense under Section 162, with no special caps and no per-recipient tracking. Book them the same way you would book pens or printer paper.
Cards Held for Sale as Inventory
Businesses that manufacture or resell greeting cards do not treat them as an expense at purchase. They are inventory. Unsold cards sit on the balance sheet as current assets, and their cost only reaches the income statement when a card actually sells, at which point it becomes part of cost of goods sold. Inventoriable costs include cardstock, ink, envelopes, and any direct labor involved in production.
Timing is the point. If a box of cards is still in the warehouse on December 31, its cost stays on the balance sheet and does not reduce that year’s taxable income. You deduct in the year of sale, not the year of purchase or production.
There is a meaningful relief valve for smaller sellers. Under Section 471(c), businesses with average annual gross receipts of $31 million or less over the prior three tax years can skip traditional inventory accounting.5Office of the Law Revision Counsel. 26 USC 471 – General Rule for Inventories Qualifying businesses can treat inventory as non-incidental materials and supplies, deducting the cost when the cards are used or sold rather than maintaining year-end inventory valuations.6Internal Revenue Service. Publication 334, Tax Guide for Small Business For an independent card maker or a small stationery shop, this cuts real bookkeeping work.
Seasonal cards create a separate wrinkle. A carton of dated holiday cards has almost no value once the season passes. A writedown alone is not enough to deduct the loss. To claim it, you have to actually dispose of the cards by selling them to a liquidator, donating them, or destroying them with documentation of the condition before and after.
Records You Need to Keep
Each category has its own documentation expectation. For business gifts, Publication 463 requires you to record the cost of the gift, the date given, a description, and the business relationship of the recipient. You do not have to name every recipient individually when the same card goes to a large group; a general description of who received them is enough, as long as it is clear you are not routing around the $25 cap.2Internal Revenue Service. Publication 463, Travel, Gift, and Car Expenses
For cards booked as office supplies or advertising, standard business expense records are enough: keep the receipt, note the business purpose, and file it with everything else. For employee cards, no employee-level reporting is required as long as the benefit stays de minimis and does not include a cash equivalent. For inventory, keep purchase invoices, production cost records, and, if you write off obsolete cards, evidence of how they were disposed of.
These line items rarely draw an audit on their own. What matters is that if a broader category on your return is questioned, the greeting card entries inside it hold up on their own terms.