Are Gift Cards For Employees Considered Tax-deductible?
13 Jul 2021
Employers are always on the lookout for creative ways to say “thank you” to their staff. Gift cards seem like a good idea because they can be customized with your company logo and message. But before you get too excited about giving out gift cards, it’s important to understand whether or not they’re tax-deductible—and if so, how much of them will count as a deduction.
Many employers enjoy giving thoughtful gifts to their consumers, employers, and employees. After all, you’re forming a connection with your staff and with your investors. Gifts, even in the form of money, gift cards, or a gesture of gratitude, have tax consequences that employers should consider.
Everything You Need To Know About Taxable Gifts
You must withhold all related federal and state personal income taxes if the donation is declared taxable income to the worker. For these numbers, you may also pay other job taxes, such as federal and state unemployment taxes.
- Staff does not have to pay taxes on property gifts if they belong to the “de minimis fringe benefit.” De minimis fringe benefits are low-value perks provided by an employer; de minimis is legal Latin for “minimal.” Perks that are determined to be de minimis fringe benefits may not be taxed in some jurisdictions as having too small value and too complicated an accounting.
- Employees must report gift cards and gift certificates as taxable income since these could be used in the same way as money. While the expense of the gift card is completely payable by the company, you must pay tax from the worker’s compensation for all these incentives.
- Employee protection and performance rewards of real property, such as a watch, can be deducted up to $400 per year per worker. Employees do not have to pay taxes on their awards, but they must be kept to a minimum.
Taking note of what you purchased, how much you spent, and the gift’s business intent, as with other tax credits, is important to ensure that you get your deduction.
It’s common knowledge that it’s easier to give than to receive, and this is especially true because your generosity will help you save money on your taxes. It’s a win-win situation: a tiny token of gratitude can make a lasting impact while still serving as a tax deduction. Just ensure you keep detailed data so your generosity doesn’t come back to haunt you during tax season!
Do you want to buy gift cards in bulk for your employees?
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