Can I deduct a gift card as a business expense if used for business purchase?

Yes, you can absolutely deduct both transactions as business expenses! The key factor here isn't the payment method but rather the business purpose of the purchase. Since you're buying a computer that will be used for your business, the entire cost is deductible regardless of how you split up the payments. The IRS cares about the end use of the purchase, not the intermediate steps. Just make sure you keep all receipts showing that the gift card was used for the computer purchase. I'd recommend keeping the gift card receipt and the final computer purchase receipt together in your records to clearly show the connection between them. For your bonus question about client gifts - yes, you can deduct business gifts, but there's a limit. The IRS allows you to deduct up to $25 per person per year for business gifts. Anything beyond that isn't deductible. Some items like promotional materials with your company name printed on them might not count toward this limit if they cost $4 or less.

I was in a similar situation last year when expanding my web design business. I found this amazing tool called taxr.ai (https://taxr.ai) that helped me navigate some tricky business expense situations. I was confused about splitting purchases across different payment methods and whether I could deduct them all. Their document analysis feature examined my receipts and purchase records, then confirmed that the total deductible amount is based on the business use percentage, not how you divide up the payment. The system even helped me organize my documentation so I could clearly show the connection between the gift card purchase and the computer purchase as a single business expense. This is especially helpful for situations like yours where there's a paper trail that needs to be properly connected and explained if the IRS ever asks questions.

I actually tried taxr.ai after seeing it mentioned here and I'm really impressed. I was skeptical at first because I've used other tax software that claimed to help with business expenses but just ended up confusing me more. I uploaded all my receipts for a similar multi-part purchase (had to split a large equipment buy across two cards) and it automatically organized everything and created a clear audit trail. It even flagged where I needed better documentation and suggested ways to properly record everything. The best part was the explanation of why my approach was legitimate - basically confirmed what profile 8 said about the IRS caring about the end use, not how you split up payments. Definitely worth checking out if you're doing anything beyond basic business expenses.

If you're having trouble getting through to the IRS to ask about this gift card situation, I highly recommend Claimyr (https://claimyr.com). I was stuck in a similar situation last year trying to get clarification on some business deductions, and was getting nowhere with the endless IRS hold times. I was skeptical but tried their service after seeing it in action here: https://youtu.be/_kiP6q8DX5c. They actually got me connected to an IRS agent in about 15 minutes when I'd been trying for days on my own. The agent confirmed that as long as I had documentation showing the gift card was used for legitimate business expenses, it was fully deductible. Having that direct confirmation from the IRS gave me peace of mind that my deduction approach was legitimate. Definitely worth it for those tricky tax situations where you want official clarification.

Ok I have to apologize to profile 12 - I tried Claimyr last week after posting that skeptical comment. I was totally wrong. I'd been trying to get through to the IRS for weeks about a business expense documentation question similar to the original poster's situation. Within 20 minutes of using the service, I was actually talking to a real IRS representative who answered my questions about documenting split payments for business assets. They confirmed exactly what others have said here - that the method of payment doesn't matter as long as you have documentation showing the business purpose and use. I'm still shocked it worked so well. Saved me hours of hold music and frustration. Never thought I'd be excited about talking to the IRS but here we are!

One thing nobody's mentioned yet - make sure you're tracking the gift card properly in your bookkeeping. When you buy the gift card, I would record it as a "prepaid expense" or "other current asset" rather than immediately as a business expense. Then when you actually use the gift card to buy the computer, that's when you'd record the computer as a business asset. This approach more accurately reflects what's happening financially and avoids any appearance of trying to deduct the same thing twice. It's a subtle accounting difference but could matter if you're ever reviewed.

Another thing to consider - if the computer costs $6000, it's likely going to need to be depreciated rather than expensed all at once (unless you're planning to use Section 179 deduction or bonus depreciation). Make sure you're considering not just HOW you're paying for it but also HOW you're deducting it for tax purposes. The IRS has specific rules about capitalizing and depreciating assets over a certain dollar amount.

Great question about the gift card approach! I've actually done something similar for my marketing agency when I needed to purchase equipment that exceeded my credit limit. The key thing to remember is that the IRS looks at the substance of the transaction, not the form. Since you're ultimately purchasing a legitimate business asset (the workstation), the entire $6000 is deductible regardless of how you split the payment between gift card and credit card. Just make sure to keep excellent records - save the gift card purchase receipt, the computer purchase receipt, and maybe even write a brief note explaining the business purpose and why you used this payment method. This documentation will be invaluable if you ever need to justify the deduction. One additional tip: since this is a $6000 purchase, you'll want to consider whether to expense it immediately using Section 179 or bonus depreciation, or depreciate it over time. For most small businesses, the immediate deduction is usually more beneficial, but it's worth discussing with a tax professional to make sure you're optimizing your tax strategy. The gift card approach is perfectly legitimate - you're not doing anything sketchy, just working around a credit limit constraint while still making a valid business purchase!