‘Tis the Season for Taxable Gift Giving

With the holiday season right around the corner, many employers begin looking at special ways to reward their employees for a job well done. These gestures take many forms, from holiday bonuses to Thanksgiving turkeys. Unfortunately, employers don’t always understand that these kind gestures may have hidden tax consequences for employees.

A question we are asked often is: “What dollar denomination causes a gift card to become taxable?” The answer is, any dollar denomination is taxable. If you provide employees a gift card for $1 or $100, it must be included in the employee’s gross wages. Providing gift cards to employees to buy Thanksgiving turkeys would be taxable, BUT giving the employee the same turkey would not be.

Below are some other examples of non-taxable gifts:

  • Occasional company parties
  • Holiday gifts (e.g., turkeys, candy) with small value (no cash or cash equivalents)
  • Occasional use of the company copier (no more than 15 percent of its total use)
  • Coffee and doughnuts provided to employees

So before you decide to shower your employees with gift cards and candy, make sure your organization will not be causing an unintended tax issue. If you need help determining if your particular gift would be taxable, give MSEC a call.