If your house is like mine, it looks like a candy factory exploded after Halloween: candy is everywhere. It’s a challenge to figure out what to do with all of the loot – we can’t possibly eat it all. This dilemma inspired a post a few years back. It’s back again, updated for the new tax year. Here are 13 uses for leftover Halloween candy – complete tax consequences (of course):
1. Give the really good stuff to your favorite tax pro *just because.*
Non-tax consequences: Everybody loves a gift, even tax geeks. Just be sure to pony up Reese’s cups and Milky Way bars – don’t try to sneak in your butterscotch stragglers.
Tax consequences: None. If you’re handing over the candy out of the kindness of your heart (or with “detached and disinterested generosity”) and not expecting anything in return, it’s a gift: gifts are not taxable for income tax purposes. And unless you make a habit of giving your tax pro gifts in excess of the annual gift tax exclusion ($14,000 for 2017 and $15,000 for 2018) – which I am in no way discouraging – you’re fine when it comes to gift tax, too.
2. Pay your tax professional in chocolate.
Non-tax consequences: Depending on rates, this could be a lot of candy. If your tax pro has a sweet tooth, he or she might appreciate it. Otherwise, they’ll probably insist on a traditional payment in the way of cash, check, credit card – or these days, bitcoin.
Tax consequences: Assuming that you can pony up enough good candy to equal the cost of your bill and that your tax pro accepts candy as payment, fees for tax advice or tax preparation – even if made in candy – are deductible as miscellaneous deduction subject to the 2% floor. You must itemize to take this deduction which means you miss out if you claim the standard deduction – which more of you might be doing next year if tax reform goes through as planned.
3. Pay your plumber or electrician in Snickers bars.
Non-tax consequences: See #2 above.
Tax consequences: None. Unlike tax fees, the cost of most personal services isn’t deductible for individual taxpayers.
4. Take a bowl (or two) of candy to hand out to your colleagues.
Non-tax consequences: Your colleagues will thank you for making them happy. Also fat. But mostly happy.
Tax consequences: Candy provided to your colleagues doesn’t qualify as a deduction, even as an unreimbursed employee expense. Qualifying unreimbursed employee expenses are deductible as an itemized deduction if they are paid or incurred during the tax year; used for carrying on the business of being an employee; and ordinary and necessary. An expense is ordinary if it is common and accepted in your trade, business, or profession, and necessary if it is appropriate and helpful to your business. While your colleagues might argue that keeping M&Ms on hand is both ordinary and necessary, the Internal Revenue Service (IRS) would likely disagree.
5. Keep a filled candy bowl at the office for your employees.
Non-tax consequences: Your employees will think you’re awesome, assuming that you give them the good stuff. Leave out a bowl of unrecognizable nougats, and you’ll have a whole group of folks posting nasty comments to Glassdoor.com before you can say butter brickle.
Tax consequences: None. There’s no out-of-pocket cost to the employer for candy that was gathered by trick or treaters, though candy purchased at a store to feed employees would be a business expense. Occasional snacks offered to employees at their workplace are de minimis and are not includable for tax purposes: the IRS considers these items “so small as to make accounting for it unreasonable or impractical.” In fact, the Latin phrase de minimis translates roughly to “of little importance” – which means the IRS clearly doesn’t know how I feel about Junior Mints. But if you were touting hand-rolled truffles a la Google, it could be considered a taxable benefit. Stick to what’s in the trick-or-treat bags.
6. Exchange your Whoppers for other stuff.
Non-tax consequences: If you use a program like Halloween Candy Buy Back, participating businesses will “buy” back your candy in exchange for cash, coupons, and other creative exchanges; businesses may then work with groups like Soldiers’ Angels to send candy to the troops. That should give you a reason to smile.
Tax consequences: Property held for personal use is considered a capital asset and you have to report any gain from a sale or exchange as a capital gain. Assuming that your candy is exchanged for an equivalent item, there should be no gain and no tax consequences. But what if you lose out by exchanging a stash of Reese’s cups for a gift certificate to a restaurant that you’ll never step foot in? You can’t deduct losses from the sale of personal property. And don’t get fooled into thinking you can take a charitable donation: you can only claim a charitable deduction for gifts made to a qualifying organization to the extent that you don’t receive something in return.
7. Donate your candy to charity.
Non-tax consequences: Warm fuzzies. You did a good thing.
Tax consequences: Assuming that you contribute to a qualified charitable organization (check with IRS if you’re not sure), you can deduct the value of the goods as an itemized deduction. Document your gift and get a receipt. There’s one more caveat: in addition to making sure that the organization actually wants your extra candy, if you’re donating property that’s not related to the charity’s exempt purpose, your donation may be limited. In other words, if you’re giving candy to an after-school program, you can be reasonably sure that the program will use the candy to accomplish its charitable purpose. But if you donate that same candy to an art museum, not so much. So, use common sense – and a little courtesy (ask first).
8. Use candy as prizes for bingo and card games.
Non-tax consequences: Kids, including big ones, love bingo. We play at our house because it’s fun, it’s easy, and notwithstanding some tricky advice from the seniors in my hometown, it doesn’t require much skill.
Tax consequences: Our family bingo games don’t have tax consequences because we play for peanuts – well, literally for peanut M&Ms, but you get the point. In general, bingo winnings are taxable to the winner as income on line 21 of your federal form 1040: it does not matter whether the winnings are in cash or property (though clearly if you eat the winnings, they’re pretty hard to trace, not that I’m suggesting you evade taxation by this method). And in case you’re wondering if your unorthodox method of play really qualifies as bingo, there is a tax statute for that (of course). At your next cocktail party, feel free to drop this actual definition of bingo found in the Treasury Regulations:
A bingo game is a game of chance played with cards that are generally printed with five rows of five squares each. Participants place markers over randomly called numbers on the cards in an attempt to form a preselected pattern such as a horizontal, vertical, or diagonal line, or all four corners. The first participant to form the preselected pattern wins the game. – 26 C.F.R. § 1.513-5
9. Use candy for tips.
Non-tax consequences: I’m not suggesting that you not give the paperboy a cash tip. But why not hand over some yummy candy as well? It can’t be a bad thing to be known as the house on the block that gives out the best tips ever. But that means you have to give out the good stuff (giving out Necco wafers isn’t going to win you any kudos).
Tax consequences: It depends on who you’re paying. You can’t deduct tips to the paperboy or the pizza delivery girl. However, to the extent that you’re tipping the babysitter or other employees, tips are taxable to them (and thus possibly deductible to you) – but see #10.
10. Make gifts for the babysitter, maid, etc.
Non-tax consequences: Who doesn’t like getting a nice gift now and again? With a little ingenuity, you can fill a cute gift bag filled with candy: voila! Minimal cost and effort to let folks know they’re appreciated.
Tax consequences: No matter what you want to call it (a thank you, a bonus, a perk), a gift made to an employee is considered compensation. There’s an exception for small non-cash gifts considered de minimis: those gifts are not taxable. So, a few Hershey bars in a gift bag would be de minimis and nontaxable – a tower of Godiva truffles, likely taxable, though clearly still delicious.
11. Recycle your stash of candy at Christmas.
Non-tax consequences: If you put leftover candy in the freezer, you can recycle it for later. Money saved. Just be sure to sort out the candy with bats and pumpkins otherwise you’ll have to explain why Santa and the elves are handing out Halloween candy. (Note to new parents: trying to make up a story about the rarely seen “Christmas bat” almost never works.)
Tax consequences: None. Even if you had paid for it, you can’t claim tax deductions for personal expenses like food or candy.
12. Conduct science experiments.
Non-tax consequences: Candy is pretty awesome and science is pretty awesome, so why not combine the two? There are all kinds of experiments on candy to keep your budding scientists interested, from melting Starbucks to floating Skittles (you’ll find details on those and more at Candyexperiments.com).
Tax consequences: There’s no allowable tax deduction for tutorials and extras to keep your kids at the top of the class since it’s considered a personal expense (exceptions exist). If you’re a teacher, however, the results are different. Teachers can deduct up to $250 if they use out-of-pocket cash to buy classroom supplies (I would argue that candy could qualify as “supplementary materials that you use in the classroom.”). It’s an above-the-line deduction which means you don’t need to itemize.
13. Eat it.
Non-tax consequences: Halloween candy is delicious. You might, however, have to explain to your son why you ate his Butterfinger without asking (pro tip: there is no suitable answer). If you decide to sneak an extra treat, remember that there could also be potential long-term effects like cavities and an extra pound or two.
Tax consequences: No immediate consequences. Dealing with some long-term consequences of eating candy, however, might be deductible. While you can’t deduct the cost of going to the gym or joining a weight loss program to get rid of those extra pounds, you can deduct dental expenses if you end up with a mouth full of Skittle-induced cavities – but even I’ll admit that’s one heck of a way to squeeze out a deduction.