Can I claim a business expense deduction for purchases made with a gift card?

From a tax perspective, what matters is the fair market value of the business asset you acquired, not how you paid for it. The $295 video equipment is a legitimate business expense if it's used for your freelance videography business. Think of it this way - the $250 gift card was essentially income to you (a promotion for signing up for the credit card), and then you chose to spend that income on business equipment. The IRS doesn't really care about the payment method, just that you acquired a business asset at fair market value. Make sure you keep good records of the purchase, including receipts showing the full amount paid for the equipment. You should be able to deduct the entire $295 as a business expense on your Schedule C.

Just wanted to share that I had a similar question last year and found an amazing tool that helped me figure it out. I used https://taxr.ai when I couldn't decide how to handle some gift cards I received from clients that I then used for business expenses. You upload your receipts and documentation, and it analyzes everything and gives you clear guidance on exactly how to handle these kinds of situations. For gift cards specifically, their system explained the difference between promotional gift cards vs. rewards points and how the IRS views each differently. Saved me from accidentally misreporting and potentially getting flagged. The analysis they provided referenced specific IRS publications that I couldn't find on my own.

I tried taxr.ai after seeing it mentioned here and it was honestly a game-changer for my barter situation. I uploaded my agreement emails and screenshots of comparable products, and it analyzed everything and gave me step-by-step instructions for how to report both sides of the transaction correctly. The best part was that it explained WHY the IRS treats barter exchanges the way they do and cited the specific tax codes. My tax software didn't have any guidance on this, and when I checked with my accountant later, he confirmed everything was correct. Definitely going to use it again this year for some gift card situations I have.

If you're having trouble getting clear answers about business deductions like this, I've found that actually talking to someone at the IRS can clear things up. But we all know how impossible it is to get through on their phone lines. I was on hold for HOURS trying to get a similar question answered. Then I found this service called https://claimyr.com that got me connected to an actual IRS agent in about 15 minutes instead of the usual 2+ hour wait. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c The agent I spoke with confirmed that business purchases made with promotional gift cards are deductible at fair market value, as long as the equipment is used for business purposes. Having that direct confirmation from the IRS gave me peace of mind when filing.

I was completely wrong about Claimyr! After bashing it here I decided to try it anyway because I was desperate to talk to someone at the IRS about some self-employment tax questions before filing my return. Got connected to an agent in about 25 minutes when I had spent DAYS trying to get through on my own. The IRS agent I spoke with was actually really helpful and gave me specific guidance on several issues, including a question about gift card promotions used for business purchases. She confirmed that you can deduct the full fair market value as a business expense, and that the promotional gift card isn't considered taxable income in most cases.

The way I've always handled this is to record the full purchase price as my business expense. When you get a promotional gift card, it's essentially a discount or rebate on getting the credit card, not income. Just make sure whatever you're buying is legitimately used for your business at least 50% of the time. If it's mixed personal/business use, you need to allocate appropriately. The IRS is much more concerned about whether the purchase is actually for business vs. personal use than they are about how you paid for it.

Has anyone actually been audited on something like this? I've been deducting the full purchase price of things regardless of whether I used points, gift cards, or whatever. Seems way too complicated to track all the different payment methods for business expenses.