Business owners often ask us for advice on GIFTING cash or items to their staff members. What’s taxable and what isn’t? Should they give cash or an equivalent to cash item instead? Let’s take out some of the confusion surrounding how to give a gift to a staff member, according to Canada Revenue Agency (CRA).
It’s important to understand Canada Revenue Agency’s gift-tax rules and the benefits of employee gifts instead of cash bonuses. Employers can use the total cost of the gift as a tax deduction and employees do not have to declare the cost of the gift as part of their taxable income. That’s a WIN for the giver and receiver!
The general rule is that all gifts given to employees are considered to be taxable benefits by CRA except fort he following exemptions:
- Employees may receive up to $500 in noncash gifts each year
- Employees can receive noncash gifts valued at less than $500 for long service recognition every 5 years*
- Employer related functions and social events valued at less than $100 per person
- Valueless items such as mugs, t-shirts, hats, coffee and snacks—*zing* corporate swag!
*Annual gifts and long service recognition gifts can be combined whereby $1000 would be a tax free benefit to the employee every fifth year.
Good to Know!
There is no limit to the amount of gifts that can be given in a year, the total value of all of the gifts must be under $500 in any given year.
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