Taxpayer asks: Each year, instead of a Christmas bonus, my employer gives us some pretty nice gifts for the holidays, stuff like iPods and gift cards. Since it’s a gift, I don’t have to pay taxes on it, right?
Taxgirl says: Clearly, a holiday bonus of cash is taxable as income. It’s not really a gift since it’s compensation for services, even if it feels like a gift. Similarly, most cash equivalent gifts are reportable and/or taxable – that would include gift certificates and yes, gift cards. They are the same as cash, only in plastic form.
However, a nominal "not cash" gift such as the ubiquitous fruit basket is really just that, a gift and is not taxable. So, employers, give your employees a perk (and something to remember) and go shopping!
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