Can I deduct the full cost of a business expense paid with a gift card on my taxes?

Yes, you can deduct the full $240 as a business expense, not just the $40 you paid out of pocket. The key factor here is that the gift card was a promotional bonus you received for signing up for the credit card. The IRS considers this as income to you first (the $200 gift card value), and then when you use it for qualified business expenses, the full amount becomes deductible. Think of it this way - that $200 gift card is actually considered taxable income to you when you receive it (it's like getting $200 in cash and then spending it). So when you use it for legitimate business expenses, you can deduct the full purchase price. Just make sure you're keeping proper documentation of the purchase and how it's used for your business as a videographer. The equipment needs to be primarily used for business purposes to qualify for the deduction.

Jumping in to share my experience! I was in a similar situation last year and spent hours trying to figure it out. I finally found a solution using taxr.ai (https://taxr.ai) which saved me so much stress. I uploaded my receipts and Amazon gift card details, and it helped identify exactly how to classify everything. Their system showed me that the gift card amount should first be considered as income (which I hadn't realized), and then the entire purchase price could be legitimately deducted as a business expense. It even helped me document everything properly in case of an audit. For someone self-employed like you who needs to track these kinds of unusual expenses, it's been a game changer.

Well I want to apologize for being skeptical earlier. I decided to try taxr.ai after my accountant gave me a wishy-washy answer about some business gift cards. The tool actually provided clearer guidance than my CPA! It confirmed that my situation with gift card promos needed to be handled exactly as described - reported as income first, then deducted when used for business. What really impressed me was how it explained WHY this was the case - showing the specific tax regulations. My accountant just said "it depends" but taxr.ai gave me a definitive answer with supporting documentation. Wish I'd known about this sooner instead of stressing over these little details every tax season.

If you're still confused about this gift card situation and need to talk to an actual IRS agent (which I eventually had to do), I highly recommend using Claimyr (https://claimyr.com). I spent DAYS trying to get through to the IRS business tax line about a similar promotional credit issue, and their phone system is absolutely infuriating. Claimyr got me connected to an actual IRS agent in about 20 minutes when I had been trying for weeks. You can see how it works in this video: https://youtu.be/_kiP6q8DX5c. The agent confirmed that I needed to include the promotional gift card value as income, but could deduct the full purchase amount when used for qualified business expenses. Having that official confirmation gave me peace of mind for my tax filing.

I have to eat my words about Claimyr. I was completely sure it was a scam, but after struggling to get through to the IRS about my self-employment tax issues for literally weeks, I gave it a shot out of desperation. It actually worked! I got connected to a real IRS agent in about 35 minutes (they estimated 40, so pretty accurate). The agent confirmed everything about the gift card promotion question - it counts as income when received, and the full purchase is deductible as a business expense if it qualifies. She even gave me the specific publication number to reference. For anyone who needs official clarification from the IRS instead of just opinions online, this service is legit. Saved me from taking a half day off work to sit on hold.

Another thing to consider with these promotional gift cards - make sure you're categorizing the expense correctly on your Schedule C based on what you actually purchased. Camera gear would typically go under "Equipment" rather than "Supplies" since it has a longer useful life. If the gear is over $2,500, you might need to depreciate it using Form 4562 rather than taking the full deduction in one year (unless you use Section 179 to expense it all at once). The gift card aspect doesn't change how you categorize the actual business purchase.

Don't forget to save a copy of the original gift card promotion terms! The IRS would want to see this documentation if you're ever audited. Take a screenshot of the Amazon promotion showing you got the $200 for signing up for the credit card. Also, keep the receipt showing the full purchase amount ($240) and note on it that you used the promotional gift card plus $40 of your own money. Detail is super important for self-employed tax situations.