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New Member
posted Dec 20, 2020 11:38:34 AM

Tax write off for referral bonus

Hello, 

I have a coaching and consulting company as a solo entrepreneur. I am considering giving referral bonus to friends and family once they refer me a client (up to 10% of client fees I'd receive). I am also considering giving it as a discount for my current clients for the future services if they refer someone else as well. Would this be an expense that I can write off?

 

I see that gift giving write off is limited $25/person, and I am hoping that offering referral bonuses can fall under promotional expenses. Is that a correct assumption?  

 

Thank you very much in advance!

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1 Best answer
Level 15
Dec 20, 2020 11:57:13 AM

Unless you entered the full amount before the discount as income, then you can deduct the discount under Advertising or Misc Expense.

4 Replies
Level 15
Dec 20, 2020 11:54:59 AM

You can’t deduct the discount on services.  You do get a tax “benefit” by having less income taxed. 

Level 15
Dec 20, 2020 11:57:13 AM

Unless you entered the full amount before the discount as income, then you can deduct the discount under Advertising or Misc Expense.

New Member
Dec 20, 2020 12:04:01 PM

If I understand it correctly, for friends and family, I can offer cash and that would be considered as the advertisement expense. 

 

If I offered it to my current client as a discount for the future services, obviously there is nothing to deduct, I would just charge them fee minus their referral bonus. 

 

Did I get it right? 

 

 

 

Level 15
Dec 20, 2020 12:12:10 PM

@Bsch4477   Your answer was right.  You should put it back.  I was just adding some more.