Are Holiday Gifts from Employers Taxable?

Many employers might be in the giving spirit this holiday season, especially as many companies might be trying to retain workers who might quit in the Great Resignation. However, employers should also consider possible tax implications of giving employees certain types of holiday gifts or bonuses.

The IRS considers all compensation to be taxable, including fringe benefits that are more than a de minimis expense to the company. If employers are handing out cash or an equivalent – such as a Visa gift card or another general use voucher – it should be taxed as part of the employee’s compensation.

It gets murkier when it comes to other gifts or perks handed out during the holiday season, however. Some fringe benefits that might be considered taxable compensation include:

• Season sporting or theater tickets
• The use of a company-owned vehicle more than one day a month
• Country club or gym memberships
• Employer-sponsored group-term life insurance coverage for an employee’s spouse or child
• Access and use of company-leased or owned apartments, lodges, boats, or other vacation amenities
• A coupon or voucher that an employee can redeem at several different grocery stores
• Vouchers that permit the employee to put non-business-related charges on the company’s expense account

On the other hand, non-taxable gifts might include:

• Group meals or cocktail parties
• Occasional tickets to events
• Coffee, treats, or other snacks
• Occasional office services that the employee would pay for elsewhere
• Gift cards to specific restaurants or stores of minimal value

Discuss Tax Concerns with San Francisco Tax Attorneys

Before your company settles on holiday perks and gifts to try to keep employees satisfied, consider the possible tax requirements. Discuss any tax concerns with the San Francisco tax lawyers of SF Tax Counsel. We advise clients on a wide range of complex tax issues, so please contact us for assistance.