Can I Write This Off?

Can I deduct gift cards for employee bonuses?

TL;DR

Gift cards given as employee bonuses are generally deductible as a business expense.

Detailed Answer

Gift cards given to employees as bonuses are considered taxable compensation and are deductible as a business expense. However, they must be included in the employee's wages and reported on their W-2 form. The deduction is allowed as long as the gift cards are given for business purposes and not as personal gifts.

Where to Put It on the Tax Form

Report this deduction on Schedule C (Form 1040) under 'Wages' or 'Other Expenses', or on Form 1120 for corporations.

Real World Example

A small retail business gives each of its employees a $50 gift card as a holiday bonus. The total amount spent on gift cards is recorded as a business expense and included in the employees' taxable income.

Calculation Required

A calculation is required for this deduction.

Calculate the total amount spent on gift cards and ensure it matches the amount reported as employee compensation on tax forms.

Audit Risk & Documentation Tips

Maintain records of the gift card purchases, including receipts and documentation showing the business purpose. Ensure that the value of the gift cards is included in the employees' taxable wages to reduce audit risk.

IRS Reference

IRS Publication 15-B (Employer's Tax Guide to Fringe Benefits)

Relevant Industries

Small BusinessRetailCorporateHuman Resources

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Disclaimer: This is for informational purposes only and should not be construed as tax or legal advice. Always consult your tax advisor.

Page created on July 15, 2025

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