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To graciously decline a holiday party invitation, express your desire to attend while conveying your inability to do so this year. You can say, "I would love to see you all, but I just don't feel that I can do that this year." If you have a specific reason, like a medical issue, you may share it, but keep it brief. Remember, "no" is a valid response without needing a lengthy explanation. Kindly thank the host for the invitation, express your wish to attend under different circumstances, and suggest reconnecting next year.