Holiday Gifts for Employees: Which Are Tax-Free and Which Are Taxable?

The holidays are a time for gratitude, and when they arrive, many employers are planning to show appreciation by giving gifts to their staff. Different types of gifts can have different tax consequences. So whether it’s a gift card, a holiday turkey or a year-end bonus, it’s important to know how the IRS will treat the gift. “Achievement awards” are deductible by the employer and tax-free to the employee if certain rules are met, including that the gift be of tangible personal property. So are “de minimis” gifts, such as that holiday turkey. But year-end bonuses are taxable. Before you finalize your holiday gift plans, let’s review the tax implications together.