Advertising Expenses and How To Claim Them

In the words of Don Draper from Mad Men, “There’s no point in being creative if you can’t sell what you create.”

While most of us don’t have Don Draper’s office or impeccable jawline, advertising is a challenging and necessary expense for all business owners. Fortunately, it’s also a tax deduction.

What counts as an advertising expense?

Simply put, advertising is any action aimed at raising awareness about a brand, product, or service.

Sound broad? That’s because it is.

The reality is, advertising does way beyond things like billboards and print ads. A whole host of expenses fall under this umbrella. To give a few examples:

• 🧢 Accessories featuring your brand or logo

• 🪧 Billboards and signs

• 💈 Brochures and business cards

• 🍏 Logo and brand design costs

• 🤝 Networking activities

• 🖥️ Online advertising

• 🗞️ Print advertisements

• 📺 Radio and TV ads

• 🌐 SEO services

• 😎 Social media influencers

• 🎨 Website design

Basically, anything that helps put your brand, service, or product on the map most likely counts as advertising. That makes it fully deductible.

Surprising costs that count as advertising

There are a few kinds of advertising I want to call out specifically, because they aren’t as straightforward as the ones I listed above:

Promotional events: When throwing a party is a write-off

A tried and true method of generating buzz about your business is hosting promotional events. This could be anything from a launch party to a holiday raffle.

Many people don’t realize this, but if the event is open to the general public (a grand opening, an open house, a sidewalk sale with free samples), the costs, including food and entertainment, are fully deductible advertising.

The catch is the guest list. If you only invite your existing clients, the IRS treats that as a private event, not a public one: the food is 50% deductible, and the entertainment (the DJ, the photo booth) isn’t deductible at all. If you want the full write-off, open the doors to the public!

For example:

• 🎵The DJ you hired for the launch party? Write-off.

• 📸 The photobooth you rented for your promo event? Claim it.

• 🤡 The clown you hired to twirl the sign outside of your business? Deduct it and then never speak of it again.

Interestingly, advertising is one of the only ways to write off the cost of entertainment. After the passage of the Tax Cuts and Jobs Act (TCJA) in 2018, entertainment costs were made nondeductible except in a few specific contexts — promotional expenses being one of them.

Goodwill advertising: When charity is a write-off

It feels good to give back to our communities, but it feels even better to get a write-off out of it.

Next time you consider supporting a charity, see if they’ll feature your business in exchange. Not only will you be able to write off the expense as advertising, but it’s also a good look for your brand.

Here are some examples of how that might work:

• You sponsor your niece’s soccer team, and they put your logo on their jerseys or team banner (think Luke Danes from Gilmore Girls)

• You donate to a local soup kitchen, and they print your logo on the brochures at their next charity banquet

• You donate to an organization, and they feature your small business on their website

• You contribute to a local fun run for charity, and they add your brand to their promotion materials

• You commit to donate 10% of your sales for the month of December to Toys for Tots

Most people take the standard deduction, which means their charitable giving produces little or no tax benefit (starting with 2026 returns, non-itemizers can deduct up to $1,000 of cash gifts, or $2,000 on a joint return, but that’s it).

Self-employed people have another route: when a payment to a charity buys real promotion for your business - a logo on the jerseys, a sponsor listing in the program - the IRS lets you treat it as an advertising expense on your Schedule C instead of a charitable donation. That deduction comes on top of the standard deduction and also reduces your self-employment tax.

Word to the wise: Don’t try to get sneaky with this. You can’t write off your regular tithe money because your business logo was printed in the church bulletin.

Rule of thumb: You must have a reasonable expectation of a financial return that’s in line with what you paid. (That’s the IRS’s actual test.) And the promotion has to be real: pledging 10% of December sales to Toys for Tots is only advertising if you tell your customers about it.

If you made a $5,000 donation to charity, ask yourself, does that sound like a reasonable price to pay for the amount and quality of advertising you received in return? There must be a profit incentive: you’re a small business owner after all.

Remember, this isn’t a donation, it's a transaction made for business purposes. You need to get something back.

Client gifts: When freebies are a write-off

Advertising is just as much about keeping current clients as it is about attracting new ones.

That’s why so many businesses have “giveaway items” that they hand out for free or with a purchase — things like pens, hats, or tote bags.

For tax purposes, giving out gifts like these does count as engaging in “promotional activities.” However, claiming these as advertising expenses can get tricky.

Here’s the rub: when gifting free stuff, you’re only allowed to write off $25 per client per year. Sales tax on the gift counts toward the $25, but incidental costs like shipping, gift wrap, engraving don’t, so you can deduct those on top.

Why only $25? Because that’s the amount that sounded reasonable in 1962 when this rule was first created. If it were adjusted for inflation, it’d be more like $225. Unfortunately, the IRS hasn’t gotten around to updating it.

This rule makes it challenging to find business gifts for your clients. Here’s an example. Let’s say you’re a freelance photographer and want to send holiday gifts to your customers. Maybe you order custom ornaments with the client’s photos.

Say each ornament costs $30 with tax, plus $5 to ship. Your write-off is $30 per client — $25 for the ornament (the cap) plus the full $5 shipping, which doesn’t count toward the limit. For 20 customers, that’s $600 instead of the $700 you actually spent. Had you picked a $25 ornament, you’d have deducted every dollar.

Are there any workarounds to this rule? Yes, there are! The $25 limit doesn’t apply, if:

• Cheap branded swag you hand out widely: items that cost you $4 or less each, have your business name permanently printed on them, and are one of a batch of identical items you give out generally, like pens, lip balm, golf balls, koozies. All three conditions have to be met. These aren’t "gifts" at all in the IRS’s eyes; they’re advertising.

• Signs, display racks, and other promotional material the recipient will use at their place of business, such as a branded display for a retailer that carries your product. Note what’s not on this list: slapping your logo on a $30 tote bag or a bottle of wine doesn’t get you out of the $25 cap if you’re giving it to a specific client.

Branded merch

This is a fun trick people don’t talk about enough: customizing items with your business name or logo makes it fair game for an advertising write-off.

You can order clothes like hoodies and T-shirts, baseball caps, tote bags, mugs, and more. They're tax deductible as advertising when they carry your brand and you’re putting them in customers’ hands.

Advertising expenses are a broad category, which means lots of opportunity for write-offs — but also lots of recordkeeping.

If updating spreadsheets and keeping receipts isn’t your idea of a good time, try the Keeper app. We’ll keep up with your advertising expenses for you, leaving you more time to shop for the perfect branded hoodie.

What doesn’t count as an advertising expense?

Advertising can shift into the gray area very quickly. You can spin almost anything to sound like “marketing.”

Here are some big-ticket items you explicitly can’t deduct:

Advertisements on a political platform

Much like church and state, politics and taxes have a long and messy history. Consequently, the tax code was written to eliminate any chance of receiving a financial kickback from political activities.

To that end, advertising done on any political platform is not deductible: it’s viewed as an indirect political donation.

Let’s say you really like the new candidate for City Council. To show support, you purchase ad space on their website.

While your civic engagement is commendable, it’s not the best move for you, tax-wise: 0% of your purchase is deductible.

Personal events

“Promotional events” often get misconstrued to mean “any event my customers attend.” Using that logic, taxpayers have tried to write off the costs of private functions, like weddings and birthday parties.

It’s hard to avoid overlap between your work and personal life. Oftentimes, customers are also friends and family. But when it comes to claiming deductions, there need to be clear parameters — especially when meals and entertainment are involved.

Here’s the rule of thumb: if the purpose of the event is not explicitly work-related, don’t try to claim it.

Client hobbies

Entertainment expenses are generally not deductible after TCJA. However, there is some wiggle room within the context of marketing expenses. But that’s just it: wiggle room, not a hall pass.

Entertainment is allowed for promotional events, not for schmoozing individual customers.

Say you and one of your customers are both avid golfers, and you regularly play together on the weekends. Even if work was discussed, don’t try to claim your golfing expenses as marketing. There’s no way to get around the fact that it’s a personal hobby.

Vehicle expenses for cars with ads on them (and no other work purpose)

One of the funniest episodes of Modern Family is when the dad, Phil Dunphey, puts a real estate ad on the family SUV, featuring pictures of his wife and daughters. The ad comes out looking like he's selling adult services, and hilarious chaos ensues.

While the cost of placing the ad on the SUV is fair game for tax purposes, Phil’s blunder raises another interesting question. He doesn’t drive the SUV for work, but does putting an ad on it suddenly make the car itself a business expense?

Unfortunately, no. Despite the fact that the SUV is now advertising his real estate company, it’s still just a family SUV, being used solely for personal trips. It’s not driven for work, so he can’t claim his car expenses.

How to claim your advertising expenses

For self-employed individuals, report your advertising expenses on line 8 of your Schedule C. From there, you can add them to your total expenses and use them to reduce your taxable income.

If you’re looking for a shortcut, the Keeper app will automatically track and sort your expenses during the year, including your eligible advertising write-offs. Once you’re ready to file, it’s as easy as uploading your forms. The app will complete the Schedule C for you.

You don’t need to look like Jon Hamm to spot a great product when you see one. Download the Keeper app and never miss another write-off.