Gift Cards for Employees [Tax-Free]

Nov 7, 2022 | Bookkeeping, General, Tax

Did You Know

Gift Card’s can be given tax-free to employees only if ALL below requirements are met:

  • The gift card is given for a special occasion (religious holiday, birthday, wedding, birth of a child) and is notprovided as rewards relating to employee-performance
  • The gift card does not exceed $500.00 (including taxes)
    • If it does exceed $500.00, the amount over $500.00 becomes taxable
  • The gift card is determined to be “non-cash” as follows:
    • The gift card comes with money already on it
    • The gift card can only be used to purchase goods or services from a single retailer or a group of retailers identified on the card
    • The terms and conditions of the gift card clearly state that amounts loaded to the card cannot be converted into cash
      • A log is kept to record gift card information containing all of the following:
      • Name of the employee
      • Date the gift card was provided to the employee
      • Reason for providing the gift card (part of social event, gift or award)
      • Type of gift card (gift certificates, chip cards, electronic gift cards)
      • Amount of the gift card
      • Name of the retailer(s)
  • The gift card is given to an arms-length employee (not family, not shareholder)

If the gift card does not meet one of the above requirements, it is considered near-cash and is taxable.