Holiday Gift Guide for Contractors
If you haven’t finished your holiday gift lists for customers and employees, you’re late. Need ideas? Take a look at what three contractors across the country have done in recent years. Their ideas include honey-baked hams, turkeys, popcorn, and steak; holiday cards, GPS devices, bonuses, and holiday parties. By the way, be sure to keep good records of what you buy and what it costs. You may be able to deduct some of those expenses.
Gifts for Customers
“We like to thank our customers by delivering gift baskets of popcorn and steaks,” says Michael D. Rosenberg, president of Rosenberg Indoor Comfort in San Antonio.
Every November, Rosenberg generates a gift list from the company’s commercial and residential customers. We order the popcorn and steaks from a company that mails it directly to out-of-town customers — with cards saying thank you,” Rosenberg says. “For local clients, we buy gift baskets from Costco and personally deliver each one. It gives us a chance to say thank you in person.”
The company normally spends $50 to $150 per gift.
By contrast, Lori Luedtke-Neff, owner of Luedtke Heating, Cooling and Refrigeration in Harrison Township, MI, just sends holiday cards to customers. “Everyone that receives a card also gets coupons for a discount on an air conditioning tune up in the spring and a furnace tune up in the fall. The holidays fall in between those two mailings, but I do like to let my customers know I’m thinking of them.”
Similarly, Dave Einerson, chief operating officer with Hiwassee Chase Air Systems in Cleveland, Tenn., sends holiday cards to commercial customers. Residential customers receive specially produced calendars along with promotional items such as pens and key chains. “We also have gift bags with the company logo,” says Einerson. “Depending on what a customer has bought, we may hand deliver gift bags filled with premiums. We don’t give out items of great monetary value.”
Gifts and Parties for Employees
Rosenberg has given honey-baked hams and turkeys to his 14 to 17 employees in the past. “We’ve found that with the sluggish economy, our employees really appreciate gift cards from retailers like Wal-Mart,” he says. “They can use the cards to buy groceries, household items, and even holiday gifts.”
Rosenberg also organizes a holiday party for employees every year. The party includes a raffle for gifts donated by vendors.
Einerson says Hiwassee Chase Air Systems also throws a party for its 12 employees and spouses or guests. The party has live music and other kinds of live entertainment like comedians, magicians, and karaoke. Everyone — employees, spouses, and guests — receives a gift worth $50 to $75. Women’s gift s come from a retailer like Bed, Bath, and Beyond, while stores like Home Depot handle the men’s gifts. Employees also receive a holiday bonus.
Luedtke Heating, Cooling and Refrigeration throws a party for its seven employees, who receive bonuses and gift s. “Last year I gave them a GPS navigation systems,” says Luedtke-Neff. “The year before, it was dinner and an overnight stay at a casino here in Michigan. The price range for holiday gift s is $100 to $150.”
Something for Suppliers
Rosenberg sends holiday cards to vendors, thanking them for their gift (which are raffled off at the party) and a note saying that the company looks forward to doing business with them next year.
Luedtke-Neff gives out snacks — a box of candy or a can of nuts. “I also like to give something to the gal that handles our advertising and the salesman from United Refrigeration,” she says. “I get them $50 gift cards.”
A Little Bit for You
Keep records and check your holiday plans with your accountant to make sure you take appropriate deductions.
To give you an idea, gifts to employees and customers get partial deductions. You can deduct $25 from the total value of gifts over the year. For example, if you give a customer three tangible $100 gifts, you can deduct $25.
The rules are similar for employees. Careful, though, cash gift s over $25 to employees are taxable income and must appear on W-2 forms. Gift cards and certificates are considered cash. The rule applies only to cash, however. Reasonable tangible gift s do not have to appear on W-2s; but you can only deduct $25 per employee.
Holiday parties for employees and spouses are completely deductible. Accountants recommend entering the expense in a category separate from entertainment, so you don’t inadvertently lose half of the allowable deduction.
You can’t deduct holiday party expenses for family members. Subtract those expenses from the party tab.
You can take the entertainment deduction of 50 percent of the cost of a holiday party attributed to customers — if the party has a legitimate business purpose such as introducing a new product.
If you invite employees and customers to a holiday party, allocate costs accordingly — and don’t forget the business purpose necessary to claiming an entertainment deduction. Again, check with your accountant.
Time to get into the spirit of the holidays. Start thinking about gifts. How about a $50 pen engraved with the employees’ name, a $75 piece of luggage or a leather notebook? Candy is good. Everyone loves chocolate.
Gifts of time are gaining popularity. Try dinner for two at a well-regarded local restaurant. How about two tickets to the theater for your employees and spouses?
Surprise employees by showing them that you know them. Those that enjoy baseball might enjoy two tickets to see your city’s professional baseball team. A theater buff might like tickets to local production.
Most of all, have some fun. It is the holidays after all.
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