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Is Employee Gifts Taxable

Employers who are planning to give gifts to employees should be familiar with the IRS laws and regulations. Your gifts should not exceed $1,600 a year and it should be given at the right occasions or situations like promotion, recognition of job well done, holiday gifts, etc.

You can also take out the tax from employee paychecks in the case of gift certificates but this should be discussed first.

Is Employee Gifts Taxable – Yes and No

Some employers are very generous and they are willing to give gifts to employees in the form of bonuses and other things. The gifts are usually tax-deductible to the employer but experts say that it is also taxable to your employees. What about small gifts? Can it still be taxable? Employers should follow the IRS regulations when giving gifts to employees. During the holiday season, most employers give flowers, wine, turkeys, and fruit baskets to employees. Such gifts are considered de minimus fringes and so it is non taxable. However, gift certificates are considered taxable and will be subjected to employment taxes.

Infrequent holiday parties are not taxable but as long as the employer is willing to shoulder the expenses, this is not a problem. Employers should always be aware of the tax implications when giving gifts to employees. It would help if you have a copy of the IRS regulations so that you will always have a guide. Some employers tend to give high gift certificates to employees but the tax is taken out of the paychecks of employees. You have to explain these things to your employees to avoid misunderstandings and disputes. It’s the thought the counts so it doesn’t really matter if you give expensive gifts or gift certificates.

Is Employee Gifts Taxable – The Employer’s Choice

When someone asks you if employee gifts are taxable, the answer will depend on the gifts given by the employers. Employee gifts are usually common in sales jobs because it serves as an incentive. This is an excellent way to keep employees motivated and to perform their duties properly. By simply identifying the gifts that are taxable, you can avoid tax issues. Giving gifts is a matter of personal choice. As long as the non-cash rewards don’t exceed $1,600 a year, it is non-taxable but the gifts should be given in recognition to accomplishments in safety, productivity, and service.

The likes or tastes of employees vary so as an employer, you should know them personally to be able to give the perfect gift. Follow the rules of IRS so that your employees won’t be subjected to tax whenever you give gifts. If you’re generous enough to give high bonuses, you can always deduct the tax from the salaries of your employees but this should be discussed carefully in a meeting with employees. Gifts are great productivity enhancers but you should follow the rules. Anything in excess is not good. Never give gifts without clear reasons because this can make other employees think that you’re discriminating.

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4 Comments

  • snmurty said on February 19, 2013
    Sir/Madam, I am working with a company for the last 20 years, As a Key person of the company, Compnay wish to give a FLAT worth (25 lakh) to me as a GIFT and the company wish to Register in my name. (At present the flat is in company's name) showing as one of the asset in company Books.
    IS Employer can give a GIFT like This.
    IS Gift tax is attracts.IF attracts the tax is payable by Employer (or )Employee? Who have to pay the Income Tax, (Employer or Employee? ) please answer.
  • Payroll Guru said on October 18, 2013
    One of the companies I process payroll for is wanting to give an Executive a wedding gift. At this point, I do not know the value of the gift, but the question is whether it will be taxable or not. Can you assist with this answer? Thank you
  • Meenakshi said on February 5, 2014
    Hello, I live in London. I am planning to give laptops and car to my employees, if they achieve their targets. what would be the tax implications.
  • dan said on May 8, 2014
    Hello, company i work for had given away a 1000 ipads at a conference to celebrate a milestone in the company history. Then 3 weeks later when someone tried to sell one an email went around that if we leave we have to pay tax back on this. Noting was signed so is this the case then ?

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