Guidelines for Giving Employee Gifts
Excerpts from http://www.nfib.com/business-resources/business-resources-item?cmsid=55351
As the end of the year nears, many business owners want to show appreciation to their employees for a job well done by giving gifts. As you consider what best suits your employees, remember there are factors to consider regarding taxes. A cash bonus might be nice, but it’s also considered taxable income for your employees. You don’t want your gift to become a burden to your employees, but a reward. Here are some guidelines for ensuring your gift makes everyone merry!
- Keep it under $25 — Gifts under $25 are tax-exempt.
- Tie gifts to employee awards — If a gift is a reward for service (i.e. highest sales) or longevity (10 years of service) it’s not taxable. However, they must be given on an annual basis.
- Make a charitable donation — If you give a charitable contribution in your employee’s name it is not taxable, regardless of the amount.
- Give company products or job performance aids — You may gift products your company creates without tax - so if you’re a clothing store or bakery this might be an option for you. Likewise, if you gift something that will aid the employee in completing their job, it’s not taxable.
- Host an outing — Taking a group of employees to an event or hosting a holiday party is a tax-free gift. You cannot however take only family members involved in your business and consider it a tax-free company expense.
For specific guidelines regarding tax-free giving, consult your tax advisor.