Can I Write This Off?

Can I write off gift cards as employee bonuses?

TL;DR

Yes, gift cards given as employee bonuses are generally deductible as a business expense.

Detailed Answer

Gift cards given to employees as bonuses are considered a form of compensation and are deductible as a business expense. However, they are also subject to payroll taxes and must be included in the employee's taxable income. The deduction is allowed as long as the gift cards are given for business purposes, such as rewarding performance or as part of a holiday bonus program.

Where to Put It on the Tax Form

Report this deduction on Schedule C (Form 1040) for sole proprietors, or on the appropriate line for employee compensation on corporate tax returns.

Real World Example

A small retail business gives each of its employees a $50 gift card as a holiday bonus. The business can deduct the total cost of the gift cards as a business expense, but must also include the value of the gift cards in the employees' W-2 forms as taxable income.

Calculation Required

A calculation is required for this deduction.

Calculate the total cost of the gift cards and ensure they are included in the total compensation reported for payroll tax purposes.

Audit Risk & Documentation Tips

Maintain records of the gift card purchases, including receipts and documentation showing the business purpose of the bonuses. Ensure that the value of the gift cards is properly reported as taxable income on employees' W-2 forms to avoid issues during an audit.

IRS Reference

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

Relevant Industries

Small BusinessRetailCorporateHuman Resources

Popular Related Pages

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 7, 2025

Back to Search