Ask The Taxgirl: Holiday Gifts

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!