It’s beginning to look a lot like… Yes, the holidays are here, and you, as part of your company’s management, you want to put in good cheer for your employees.
Aside from the office holiday party, you also want to give them a token or two to show how you appreciate their work for the holidays.
Do you know that there are holiday gifts that are considered tax deductible?
First, let’s get the terms out of the way. IRS defines “Gift” as–
“Any transfer to an individual, either directly or indirectly, where full consideration (measured in money or money’s worth) is not received in return.”
Here are 4 gifts you can give your employees that may or may not be tax deductible.
1️⃣ Gift Cards, Cash Gifts, Gift Cheques.
If you give a cash equivalent gift like gift cheques or gift certificates, it is taxable.
2️⃣ De Minimis
The IRS defines de Minimis benefits as–
“is one for which, considering its value and the frequency with which it is provided, is so small as to make accounting for it unreasonable or impractical. “
De minimis is non-taxable. The keyword in this benefit is it should be not frequent and of minimal value. Most of the time, its total value should not be more than $100, although this is not a hard line. Here are examples:
- Flowers
- Gift baskets or holiday baskets
- Turkey, duck, ham, or other food items.
- Tickets to sporting events, theater, concerts, or movies.
- Holiday decors
3️⃣ Prizes
Oh, the office holiday raffle! It’s a source of joy and yearly envy for many employees. Hopefully, your employees understand that you do this for them, as prizes are taxable.
4️⃣ The Holiday Party
The Office Holiday party. Even though we think that the government taxes nearly everything we sweat for, they’re no Scrooges. Holiday parties are not income and are fully tax deductible. There are some caveats, though:
- Every employee must be invited, with no discrimination.
- The party must not be too extravagant and excessive.
- It needs to be practical.
- There should at least be some food and beverages.
As a company, show how much you value everyone by spreading the holiday cheer, knowing especially that some things are surprisingly tax-free and some are (even more) amazingly tax deductible! We at Peter Witts CPA can help you plan a tax-free Holiday experience for your company. Feel free to contact us. Happy Holidays.