‘Tis the season of employee-gifting! As a business owner, carving out time during the hustle-and-bustle of end-of-year sales quotas is a must. Unlike those obligatory White Elephant presents, employee gifts are the gift that gives back as personalized presents from an employer can help employees feel valued, leading to boosted productivity, better team morale, and higher employee retention rates. That being said, you’ll want to shop for holiday gifts with time-efficiency and productivity in mind.
There are dozens of holiday gift options to choose between, from career development courses to noise-isolating headphones to healthy office snacks—all of which are deductible when tax time rolls around.
As you spend time away from boardroom meetings playing the role of Santa’s elf, you’ll need to research highly recommended and productivity-boosting holiday gifts to give your team. Additionally, you’ll need to have a basic grasp of what they mean in terms of tax write-offs.
Gift Cards and Gift Certificates
Since gift cards are the equivalent of cash, gift cards and gift certificates for employees are considered payment. That means they’re perceived as taxable income, so every gift certificate you buy for an employee is deductible no matter the amount.
For example, when treating your employees to giving gift cards from a company such as PFR Corporate Gifts, every gift card you purchase will be deductible regardless of the intended purpose. Certificates for fruit, turkey, ham, vegetables, or beef steaks will all act the same.
What’s more, holiday meal gift certificates are an excellent way to boost employee productivity and gift certificates are the perfect vehicle for expressing your appreciation to your employees. As a bonus, this holiday gift will allow your staff members to feed their hungry loved ones and out-of-towners during the holiday season, a gesture that will be remembered all year long.
You can write off holiday gifts for employees on your taxes — but only if you don’t spend above a certain amount. The IRS only allows a $25 deduction for each person to whom you’re giving a gift. So, in other words, you’re limited to spending $25 per person per year.
This $25 limit doesn’t include any additional costs associated with the process of giving a gift. If you go to the post office and ship a gift to a remote employee, that cost doesn’t count as part of the $25.
Keep in mind, too, that the $25 rule is only applicable to individuals. If you’re gifting to a married couple you work with, the number goes up to $50. If you’re a business owner, note that you can deduct company-wide gifts no matter the amount.
If gifts of property are a “de minimis fringe benefit,” they won’t be considered taxable income for your employees. A de minimis fringe benefits are a gift so small that they aren’t worth counting — think the occasional bouquet or a Starbucks latte throughout the year. Holiday gifts are classified as de minimis fringe benefits, too.
While there’s no limit on the cost of de minimis fringe benefits, you can only deduct $25 of gift expenses per person each year. So, if you spend over $25 on one employee, you’ll only be able to deduct the first $25 of that total expense.
If you decide to give your employees an award related to achievement, service, or safety, these rewards are all deductible for your business. Awards consisting of cash or property are both considered deductible. Just be aware that the IRS has set specific requirements that apply to deducting each kind of award.
Regardless of what type of holiday gift you decide to give, keep meticulous records so you’ll be ready when April 15th rolls around. When you give your employees presents that can boost their productivity and benefit your tax bill, these gifts will keep on giving all year long.