Employee gifts can be a great way to show appreciation for a job well done, whether it's a Christmas basket or custom branded socks. But there are things you must consider before you start distributing gifts. For example, are employee gifts tax-deductible? All you need to know is in this article!
(Remember, however, your business may be exempt from these rules based on special situations. This article is for information purposes only and isn’t intended as legal or tax advice. For that, consult your tax lawyer or accountant).
WHAT ARE THE UNITED STATE’S RULES FOR EMPLOYEE GIFT TAX DEDUCTIONS?
The rules for employee gift tax deductions in the United States are relatively straightforward. To be deductible, employees must receive the gifts in their capacity as employees, and they must be of a reasonable value. There is no set limit on how much you can deduct for employee gifts, but you cannot deduct more than $25 per person per year.
WHAT TYPES OF GIFTS ARE TAX-DEDUCTIBLE?
There are a few different types of gifts that are tax-deductible. The most common type is food or drinks, as long as it's not lavish. You can also deduct the cost of gift cards, as long as they are given to employees in their capacity as employees. However, you cannot deduct the cost of gift cards given as bonuses or rewards.
CAN SOMEONE DEDUCT THE COST OF CUSTOM PIECES?
Yes, you can deduct the cost of custom promotional items. This is a great way to show your employees that you appreciate them. As long as the gifts are given to employees in their capacity as employees and are of a reasonable value, you can deduct the cost of the gifts up to $25 per person per year.
ARE THERE ANY EXCEPTIONS TO THE GIFT TAX RULES FOR EMPLOYEES IN THE US?
There are a few exceptions to the gift tax rules for employees in the United States. The most notable exception relates to gifts given as part of a holiday bonus. These types of bonuses are considered taxable income, but the taxed amount is generally lower for non-cash gifts than if the bonus was paid in cash.
If you’re still asking, “are employee gifts deductible?” and unsure of all you need to know, consult a financial advisor or tax attorney for professional advice.