Is gift cards for employee bonuses tax deductible?

Gift cards provided to employees as bonuses are deductible as a business expense under ordinary and necessary business expenses. However, the IRS treats gift cards as cash equivalents, meaning they must be included in the employee's taxable income and reported on their W-2 form. For example, if a business gives a $100 gift card to an employee, the business can deduct the $100 as a wage expense, and the employee must report it as income. This differs from de minimis fringe benefits, which are small, infrequent gifts that are not taxable, but gift cards do not qualify as de minimis due to their cash-equivalent nature.