Theresa Arndt, CPA

This time of year we get lots of questions about giving gifts to employees.   Are employee gifts taxable to the employee?  What about gift cards or certificates? The answer depends on the type of bonus or gift that you give.  Each have varying tax consequences.  Let's take a look at some of the most popular ones and their tax treatment. Cash Bonus Giving a cash bonus to employees during the holidays, or anytime throughout the year, is treated as taxable  income to the employee regardless of the amount.   The amount of the bonus will be subject to payroll and income taxes as if they were normal wages.    Non-cash Gifts A small property gift given to an employee will most likely be excludable from income as a de minimis fringe benefit.  The term  de minimis  is generally used to describe something that is too small or insignificant to be considered, something unimportant.  It actually comes from a La...

During the holiday season many business owners give gifts to their clients, prospective clients or employees to thank them for their business or show appreciation for their hard work.      But did you know your deduction for that business gift is limited to $25?   The basic rule is that if you give someone a gift for business purposes, your business expense deduction is limited to $25 per person per year.   Any amount over the $25 limit is not deductible.   If this amount seems low, it is.   That’s because it was established in 1954.      Most taxpayers are at least vaguely aware of this tax rule.   But what isn’t as widely known is that there are a few exceptions and work-arounds to this rather restrictive limit.      Here’s a quick rundown of the major exceptions to the $25 limit.   Companywide gifts   The $25 limit applies only to gifts to individuals, either directly or ind...