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View Our 2015 Employee Gift Guide with 18 Awesome Gift Ideas Your Employees Won’t Pay Extra Taxes On
Are you looking for a way to reduce your taxes as a business owner and show your employees a little appreciation for their loyalty and hard work? Consider giving out employee gifts! They get something awesome, and you get a bit of a tax break. Before you start handing out the Rolex watches, you do need to know the rules.
First, there must be a reason to give employee gifts. Birthdays, the birth of a baby, a religious holiday, or a wedding are all acceptable excuses to get generous and show your appreciation for employees. Another good reason is an work anniversary gift IF the employee has worked for your company for AT LEAST 5 years, and they have not had a previous work anniversary gift within the past 5 years. Once you have picked your reason, don’t start handing out the goodies just yet. While cash is usually a one-size-fits-all kind of thing, in the case of employer tax free gifting it is a no-no.
An employer can give an employee up to $500 a year in non-cash gifts before the gift becomes taxable. Anything over that $500 limit, or any form of cash is considered a tax benefit, leaving the employee with additional gift taxes to pay at the end of the year. Yuck! Skip the cash (and the other cash like items listed down below) and consider one of these ideas instead to keep the gift tax monster at bay.
15 Cool, Hot, and/or Practical Non-Taxable Employee Gifts
- A charitable donation on behalf of an employee can be a cool gift if you give to the right charity. Does your employee have a thing for animals? Consider adopting a panda in their name from the World Wildlife Fund (WWF). Don’t worry, a real panda will not be shipped to their home, but some really cool donation gifts will be. One-time donation amounts start at just $25 and go up to $250. There are 111 animal choices to adopt including the polar bear, the African elephant, and the macaw. It’s also important to note that this gift can be a conversation starter on dates, as the giftee can melt hearts when bragging, “I have adopted a panda.” Is your employee allergic to every animal under the sun? Consider donating in their name to a children’s charity, a local hospital, or the local library.
- Everything but the camping fee is both cool and practical. On the top of most people’s to-do list is to spend more quality time with those they love. Give your employee a push in the quality time direction by giving them camping gear. It can be as simple and affordable as a tent, or as elaborate as a multi-room tent, sleeping bags, a lantern, and a mini portable grill. Just remember to stay under the $500 limit. Consider throwing in a fun book like The Worst-Case Scenario Survival Handbook or Wilderness Survival For Dummies.
- Apple anything is HOT! In every adult is a gadget loving child, and 99.9% of kids love (or want) Apple products. When considering HOT electronic gifts, think iPods, iPads, and even iPhones. As long as the electronic gift was under $500, it counts! Steer clear of iTunes gift cards though, as they fall under the cash clause (more info at the end of this post). On a budget? The 5th Generation Apple iPod shuffle starts at $48!
- A new LCD HDTV (announced in your best game show voice) is both hot and cool! Who wouldn’t like a nice, new, big, thin, high definition TV from the boss? Pick up the Philips 40 inch LCD 1080p HDTV for less than $400 each, and give them to your employees. You will instantly become THE best boss ever. While it’s true that not every person watches TV, once they receive this gift they just might.
- The iRobot Roomba or Scooba is practical and HOT! These are two of the hottest household gadgets on the market, and start right around $300 depending on model. The Roomba is a robot that vacuums the floor, and the Scooba mops. According to the manufacturer, “the Roomba collects dirt, pet hair and other debris from all areas of the floor, including under and around furniture and along wall edges.” Employees will love either of these, because it means less chore time for them. The Scooba kills 98% of common household bacteria, which can also mean healthier employees.
- The W Series Sports Walkman is oh-so cool! This HOT gadget is a WATERPROOF mp3 player than can go 6.6 feet deep in water. The battery lasts 8 hours, and a 3 minute charge lasts a full hour! It has 4G of storage space. Employees can listen to music, books, or whatever they download while working, swimming, or even singing in the shower. This highly coveted gadget comes in at $99!
- PHSP is oh-so practical! Employers can pay for a “private health service plan” for their employee(s), and it be tax free for the giftee and a tax deduction for the business (except in Quebec). Things like employer paid doctor’s visits and dental services are a fabulous gift that will leave your employees feeling appreciated. It’s important to note that a PHSP is different from employer-paid premiums that go towards a group sickness or accident insurance plan (which ARE taxable). Learn more about PHSP’s on the CBC at PSHP: The Best Health Plan You’ve Never Heard Of.
- Lap sized blankets and adorable mini desk fans are quite practical. There is always someone in the office piling on the extra sweaters and letting everyone know they think the office is too cold, and two cubicles down is the person threatening to get naked if the cool air isn’t turned up. One way to keep everyone happy, dressed appropriately, and maybe even quiet is with the gifting of lap blankets and mini desk fans. Take it a step farther and go with heated lap blankets that employees can plug in at their workstations. As long as their total gifts for the year were less than $500, and you gave them out for one of the reasons listed above, they won’t be taxed.
- The Olympus Tough TG-2 is a HOT gift even the crabbiest employee would love to receive! What’s special about this camera? This fancy camera is shockproof, crushproof, dustproof, freezeproof and waterproof. This means even if your employee is having “one of those days” it will survive. For $380 you get a 12mp CMOS sensor, 4.5 – 18mm focal length, a LED illuminator and GPS image tagging.
- Every birthday boy or birthday girl will crack up if you gift them a super cool pair of Shark Socks for Sandy. These are socks shaped like a shark, and come in at an affordable $40. When you wear them, it looks like a shark is eating your foot. This gift would lighten the mood, and show your employee not only do you care, but you also have a sense of humor.
- For the newlyweds, consider personalized (yet practical) stationary. Since it is a wedding gift (and not cash), it automatically qualifies as non-taxable, as long as it is under $500. Personalized stationary is affordable, starting around $10. Deluxe sets can go for several hundred dollars and include everything from paper, to notebooks, to pens, to envelopes printed with the couples name or initials on them. For the “green couple,” pick stationary made from recycled products.
- For the new parent, buying them a gift from their baby registry is thoughtful and practical. Since it is deductible, don’t be afraid to splurge on one of the more expensive items on their list, like the all-in-one travel system or the crib bedding set. This shows the giftee that you took the time to see what they needed, and that you value them.
- Magazine or newspaper subscriptions can be a fun gift. Make sure you order the subscription in the employee’s name, instead of just giving them a gift card and letting them pick their own title, or it becomes taxable. Consider a title related to the company type, or choose one based on their interests.
- Nothing says practical and useful more than a business card holder does! It can be as simple as a pocket or purse sized holder, or as fancy as a personalized card holder for their office desk. If you put the company’s logo on it, and keep it cheap, it doesn’t even count towards their $500 annual limit.
- Edible goodies can be quite cool, if you are careful. Think a popcorn basket, a cookie bouquet, an edible fruit arrangement, or even a basket of cheeses. Foods can be a bit tricky though, as you never known (unless you ask first) if your employees have food allergies or special dietary needs. While you may be thrilled to get a log of sausage bigger than your head, your vegan employee may be offended. Gift food with care!
Want to come up with something amazing, practical, or off-beat on your own? The Canada Revenue Agency has an easy to use tool that can help you determine if your gift is tax free or not. Use it here!
Want some examples of other taxable and non-taxed employee gifts? The Canada Revenue Agency has a cool chart here. The chart also shows you that inexpensive items with a company logo (like t-shirts, pens, and coffee mugs) aren’t taxable and aren’t even counted in the $500 annual limit.
Keep in mind that some things you’d think would be non-taxable are actually taxable. Here is a list of some tricky gifts that will have your employees covering the tax:
- Gift Cards and Gift Certificates: These are treated the same as cash when it comes to taxable gifts. Gift cards and certificates in any amount are unfortunately taxable. Get around this by giving them the actual item, and not what they would have bought with the gift card. For example, instead of giving Cindy a $100 certificate to her favorite candle store, give her a gift basket from the store valued at $100.
- Stocks and Securities: Just like gift cards, stocks are considered cash and will leave your employees coughing up the tax.
- Gold Nuggets: Don’t laugh! The Canada Revenue has this listed as a taxable gift item. Therefore, if you happen to have a stash of gold nuggets sitting around in your office, you should keep them (or even lock them up in a safe at home) and come up with something else to give to those you employ.
- Lavish parties: Most business assume throwing a party for employees (such as a Christmas party) is not taxable, but it really depends on the value of the party. Any party that costs the employer more than $100 per person is taxed. Keep parties simple and budget friendly to avoid coughing up extra tax money later. For example, rent a cheap Santa suit instead of hiring an actor, and serve affordable finger foods instead of a five-course meal with steak and lobster. Your employees will thank you later!
- Meals: Think buying your employee dinner isn’t taxed, you’re wrong. The only time a meal is not taxed is when the employee has worked at least 2 hours of overtime on top of their normal shift, and then the meal must be $17 or less in value.
- Tuition: One would think a scholarship wouldn’t be taxed, but if the class or course is not related to the job, it is a taxable gift. If the scholarship is given to an employee’s child for secondary education, the child is responsible for the taxes.