Tax Accounting Payroll Advisory             Our Offices

View Padgett President Roger Harris' congressional testimony on the impact of the Corporate Transparency Act and the BOI reporting requirements here.

Find an office
Skip to main content

Spread holiday cheer (and save money doing it!)

Who doesn’t love opening a present this time of year? Spreading that holiday cheer through a gift to your employees and customers is a great way to get in a festive spirit and thank them for their hard work.

Remember that only certain types of gifts are tax deductible, so make sure you follow the rules to avoid feeling like a Grinch in tax filing season. Here’s a quick overview of some holiday gift options for your employees and customers: 

Employee Gifts:

The IRS doesn’t recognize the traditional ham, turkey, or other item of nominal value given at the holidays as taxable income, but rather as a de minimis fringe benefit (one in which the value and number of times it’s given is so small, accounting for it isn’t practical). But if an employer gives cash or a cash equivalent — like gift certificates, gift cards, or prepaid cards — then those employee gifts are taxable regardless of the amount and must be included in the employee’s wages. 

Customer Gifts:

Deductible business gifts are limited to $25 per recipient per year. There isn’t a limit on the number of people you can share a gift with, nor the amount you can spend. The limit is just  on the amount you’re able to deduct. The $25 limitation doesn’t include incidentals like gift wrapping, since it doesn’t add value to the gift and therefore wouldn’t be deductible. And don’t forget that married couples and partners of a partnership are each considered one recipient. 

Holiday Parties:

Office holiday parties are more likely to happen this year! Remember, the food at a holiday party is fully deductible only if you’re throwing the party for the benefit of employees and their families. Historically, if clients, independent contractors, or customers attend the holiday soirée, then entertainment rules apply and only 50% of the food and beverage costs associated with these partygoers are deductible (and this applies even if you hold the party virtually). Due to Covid-19 relief, an exception to the 50% rule applies for 2022 if you purchase food and beverages from a restaurant.But don’t get too lavish! The IRS always keeps an eye on business deductions and the costs associated with an extravagant event. 

Thinking of spreading holiday goodwill this year? Reach out to our trusted network of accountants, tax experts and business advisors at Padgett so we can make sure your employees and customers can benefit from a gift and you don’t get stuck with a lump of coal in return. Find an office near you today!

We encourage you to contact us with any questions.

This field is for validation purposes and should be left unchanged.