Gift Cards, Parties, Bonuses — What’s Taxable?

As the holiday season approaches, many workplaces are organizing celebrations, gifting employee gift cards, and planning bonuses. It’s a great time to recognize your team but also the time of year when taxable benefit mistakes happen most often.

Let’s be honest: nothing kills the holiday spirit quite like discovering your office Christmas party has become a confusing tax headache. The good news is that with a little knowledge, you can celebrate your team and stay on the CRA’s nice list.

During Wagefest, our annual virtual conference for Canada’s payroll and small business community, Dawn Irmscher, PLP, CHRP, CPA, CMA and Director of Payroll Operations at the University of British Columbia, walked through exactly how the CRA treats common year-end perks. Her session Taxable Benefits Without the Headaches offered practical clarity on where employers tend to go wrong, and what the rules actually say.

Gifts, Awards, and Bonuses

Gift Cards

Gift cards are one of the easiest perks to give and one of the easiest to misclassify. Before getting into what’s taxable and what isn’t, it helps to understand how the CRA categorizes different types of gifts.

The CRA breaks gifts and awards into four buckets, and the tax treatment depends entirely on which category your gift falls into:

• Cash: Straightforward — money paid directly to an employee.
• Near-cash: Anything that functions almost like money, such as prepaid credit cards or open-value cards that can be used broadly across many retailers. These are always taxable because the employee has full spending flexibility.
• Non-cash: Gifts with a fixed, specific value (like a retailer-specific gift card that meets CRA rules). These may qualify for the non-cash exemption.
• In-kind: Physical items like a watch, flowers, or event tickets. These can also qualify as non-cash when they meet CRA conditions.

Once you know the difference, the CRA’s non-cash gift policy becomes much clearer: employees can receive up to $500 total in non-cash gifts and awards per year without it becoming a taxable benefit — but only when every CRA condition is met. This $500 isn’t a per-gift limit; it’s an annual total that applies across your entire organization.

When gift cards are non-taxable

• It is truly non-cash
  The employee cannot convert it to cash, transfer it, or trade it in. If it walks like cash and talks like cash, the CRA treats it like cash.
• It’s given for a specific occasion
  Examples Dawn highlighted include:

• • A birthday
  • Wedding
  • A non-performance work milestone (such as anniversaries, not sales targets)

• It’s for a single retailer (or related group of retailers)
  Think: a Starbucks card, a local restaurant group, or a specific store. The key word here is specific.
• It’s preloaded with a fixed dollar amount
  No open-value or flexible-load cards. The CRA wants to see a set amount from the start.
• You maintain detailed records
  Here’s where many employers trip up. The CRA expects logs including:

• • Employee name and employee number
  • Vendor
  • Amount
  • Occasion
  • Date
  • Issuing supervisor

Why does this matter so much? The exemption applies across the entire organization, not just one department. If Sandra in Marketing gives someone a $300 Starbucks card for Christmas, and then their new supervisor in Sales gives them a $250 Best Buy card for hitting a milestone, you’ve just blown past the $500 limit. Without centralized tracking, these gifts become taxable surprises.

When gift cards are taxable

Dawn also made one guiding rule clear: anything that works like cash is treated like cash. Though these sound similar, their distinction is important. Cash is straightforward — money paid directly to an employee. Near-cash is anything that functions almost like money, such as prepaid credit cards or open-value cards that can be used broadly across many retailers. Non-cash gifts are items with a fixed, specific value (like a retailer-specific gift card that meets CRA rules), and these may qualify for the $500 exemption.

Amazon gift cards
Yes, really. Amazon is considered a distributor, not a retailer. That means these do not qualify under the CRA policy, regardless of amount or occasion.

Prepaid credit cards

• Visa
• Mastercard
• American Express

These are treated as near-cash benefits and are fully taxable.

Anything convertible to cash
The CRA includes items like stock options and even diamonds in this category. If it behaves like money, it’s taxable. 

Long-service awards

Long-service awards carry a $500 non-cash exemption, but Dawn emphasized a crucial timing rule that catches many employers off guard:

• They must meet the same gift-card conditions outlined above
• They can only be awarded once every five years

Bonuses

There is no grey area here. Cash and near-cash benefits are always taxable and must be processed through payroll with statutory deductions. This includes:

• Year-end bonuses
• Profit-sharing bonuses
• Cash gifts
• E-transfers and cheques
• Prepaid Visa/Mastercard/Amex cards
• Performance-related gift cards

If it feels like income, the CRA treats it as income.  

Holiday Parties and Social Events

In-Person Events

The good news is that the CRA is fairly generous with workplace events–holiday parties included.

In-person social events are non-taxable when:

• The total cost is $150 or less per person (including tax)
• All employees in the workplace/division are invited
• The event falls within the annual six-event limit

Here’s the kicker: if the cost per person exceeds $150, the full amount becomes taxable, not just the overage. So a $175-per-person holiday party means the entire $175 becomes a taxable benefit, not just the extra $25.

Important notes:

• Spouses or partners count toward the per-person limit (so if you allow plus-ones, factor that into your math)
• Transportation and accommodation do not count toward this limit
• The six-event maximum applies to all employer-paid social events combined — in-person, virtual, and hybrid

Virtual Events

Virtual events have their own thresholds (and yes, they count toward your six-event annual maximum):

• $50 per person including taxes — food, beverages, delivery only
• $100 per person including taxes — food, beverages, delivery and entertainment

If you provide a gift card for virtual attendees to purchase food, it must meet the non-cash gift card rules to remain non-taxable. Translation: Don’t send everyone a Visa gift card for pizza. Send them a voucher for a specific restaurant or food delivery service.

Team-Building vs. Social Events: An important distinction 

Dawn also clarified an important distinction that helps with grey-area events:

Team-building = events tied to work purposes. Workshops, planning sessions, work-related meetings are not taxable. Meals provided during these activities follow the same logic.

Social event = the primary purpose is enjoyment, celebration, or recognition. Those then fall under social-event rules and need to meet the cost threshold to stay non-taxable.

Pro tip from Dawn: Nine times out of ten, if an employer is paying for something, it’s going to be taxable. Start with the assumption that it is taxable unless you can identify a specific exemption. This approach will save you from costly mistakes.

What happens if you get it wrong?

A gift card that seemed fine. A party that ran a little over budget. A bonus paid outside payroll just this once. These are the kinds of small decisions that feel harmless until the CRA reviews an employer’s records and decides a benefit should have been treated as taxable.

When that happens, they don’t quietly adjust things on the employer’s end. They correct it at the employee level. The CRA amends the T4, sends the employee a Notice of Reassessment and suddenly an employee receives an unexpected tax bill (often including interest) tied to something they thought was a simple holiday perk. And it doesn’t stop there — the employer may also be on the hook for the EI and CPP contributions that should have been withheld, often covering both the employee and employer portions after the fact.

Dawn’s guidance on this was simple: getting these details right isn’t just about compliance — it’s about keeping goodwill intact. A little structure now protects your team from those surprise envelopes in March, and ensures the things meant to make people feel valued actually do.

Your Holiday Compliance Cheat Sheet 

Make year-end compliance easier with this quick reference:

✓ Use retailer-specific gift cards, never Amazon or prepaid credit cards
✓ Keep a centralized gift-card log (including employee name, amount, vendor, occasion, date, and supervisor)
✓ Track event costs per person (remember: spouses count!)
✓ Follow the six-event maximum across all formats (in-person, virtual, hybrid)
✓ Run all bonuses through payroll with proper statutory deductions
✓ Include taxable benefits in the correct pay period (not year-end adjustments)
✓ Stay consistent with documentation across departments

If you’re looking for a deeper dive into how taxable benefits work and the mistakes the CRA sees most often, check out our blog post here: Taxable Benefit Mistakes You Can’t Afford to Make. 

Year-end is easier with Wagepoint

Wagepoint helps Canadian employers handle taxable benefits cleanly and confidently. From bonus processing to CRA remittances to T4 generation, we keep payroll compliant so you can focus on celebrating your team–because the holidays should be about appreciation, not audit anxiety. Learn more and request a demo here.

Written by Amy Statham

Amy is a seasoned marketer with more than a decade of experience creating content, building communities, and shaping brand strategies in Canada’s tech ecosystem. As the Senior Manager of Content Marketing and Social Media at Wagepoint, she creates clear, approachable resources to support bookkeepers and small business owners.

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