Business Tax Tips: Are Christmas Gifts Tax Deductible?

It’s that time of year again—secret Santas, office parties, and Christmas goodies found on every desk. The holiday season is in full swing, making it the perfect opportunity to show your staff how thoughtful you are by getting them some gifts. But as many small business go, spreading the holiday cheer can get pricey, fast. Here are some handy tax tips to help keep your yuletide spending under control, without making you look like a Grinch.

Start saving early

If your budget is tight, one of the first things to do in preparation for the gift-giving season is to save. Just like you would do for your personal budget, squirrel away some cash each month. You’ll not only have saved enough to get some great gifts, but also avoid having to buy anything on credit.

Now that you’ve got some money saved up for the holiday season, check out these frequently asked questions on what is taxable during the holiday season—your employees and your wallet will thank you.

Are company bonuses taxable?

Absolutely. There really is no way of getting around it. If you are thinking about giving out Christmas bonuses to your staff this year, keep in mind that the CRA considers the amount a taxable income for your staff. However, they’re probably happy to receive the cash bonus, as they’ll still have a net gain.

Are business gifts taxable?

Are you one of those generous bosses that showers your employees with gifts all year long? If you are, then you’ll have to keep an eye on the total costs. According to the Canadian Revenue Agency, you can give non-cash gifts to your heart’s content as long as the combined total doesn’t exceed $500.00. Anything above that amount will be taxable for your employees. When it comes to gift giving, the CRA has nothing on Ebenezer Scrooge.

Are gift cards taxable?

Getting your employees a gift they like can be a challenge. So why not give out gift cards instead? Employees can get what they want while avoiding the tax man at the same time, right? Wrong. The CRA treats gift cards exactly like cash, no matter the amount. Even a $5 Starbucks gift card is taxable. You’d be better off buying them a coffee instead.

Are Christmas parties taxable?

When it comes to what the CRA views as a taxable benefit during the holiday season, it is not all bad news. If you are thinking about hosting a Christmas party for your employees, you’re in luck. Your employees won’t have to report the party as a gift income, as long as the cost per employee doesn’t go beyond $100.00.

‘Tis the season to be generous (but not at the risk of going bankrupt). Remember to work within your budget, giving your employees what you can afford. And if your cash flow is really tight, you can also send out signed Christmas cards—after all, it’s the thought that counts.

Give yourself the gift of professionally balanced books this year by contacting BCJ Group.

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