December 2017: A few Tax Tips to Reduce Your Taxes!

NOTE: Not all tax tips are applicable to all taxpayers. Please consult with your tax adviser/professional to see if these tips may work for you.

Tip #11: Give tax-free holiday gifts to your employees and get a tax deduction

It’s holiday time and there are some tax favored ways in which you can provide gifts to your employees and get a tax deduction for the value of the gift! Here are a few thoughts to keep in mind (from a tax perspective) in this holiday season.

If the gift qualifies as a “de minimis fringe benefit”– the value of the holiday gift is NOT included in the employee’s wages or salaries for the year. This makes it a non-taxable fringe benefit.
The employer is permitted a tax deduction for the value of the gift (what the employer paid for the gift). This is a nice planning opportunity given that the employee does not pay any taxes on the value of the gift.
A “de minimis fringe benefit” is generally provided by the employer on an infrequent basis and has a low fair market value.

Here are a few examples:

Food products (such as a turkey, ham, cheese/fruit basket, etc.).
Entertainment tickets (theater/music/movie/sporting events, etc.)- but watch the value.
Holiday parties/dinners, etc.
Flowers,books, other specific gifts of a low fair market value

Here are a few items that are NOT considered to be a “de minimus fringe benefit”:

Cash- no matter how small or large the amount.
Gift certificates, debit cards or similar items that are convertible to cash- no matter how small or large the amount. However, if a gift certificate is convertible to only a turkey/ham/food basket at a certain retailer, it is considered to be a “de minimis fringe benefit.”

These rules allow all employees, including owners of a LLC (taxed as a partnership) and more-than-2% S shareholder-employees, to receive the above tax-free de minimis fringes.