Did you know that providing your staff with gifts rather than cash bonuses may help you to reduce your tax burden? The gift can be claimed as a tax deduction on your Canadian income taxes. Furthermore, because the gift is not subject to taxation, the employees benefit from it.

Tax Rules For Gifts Given To Employees

Any reward given to employees is considered a taxable benefit. Tax Accountant Toronto team list that the following are the only exceptions:

  1. If the employee gets a gift valued at less than $500 in fair market value for non-cash present items each year.
  2. If the employee has worked for the firm for a long time and only received small gifts every five years or so.
  3. Activities or functions where the cost per employee is $100 or less
  4. Meals provided during office functions or at other work-related events such as meetings and training sessions
  5. Coffee, tea, snacks, and t-shirts are examples of items with little cash value.

The IRS may take issue with the amount of money received as a gift if it exceeds $500, which is often seen as taxable benefits. To comply with this rule, the employer must make source deductions in this situation.

Tax Accountant Toronto team state that the best part is that there are no restrictions on how many gifts an employee can receive throughout the year. Furthermore, little presents are not counted as taxable benefits.

How To Use Employee Gifts As Tax Deductions

Tax Accountant Toronto team recommend that you should think about the present you give your staff since certain presents must be considered taxable benefits by the CRA. If you provide performance-related rewards or bonuses, they will be seen as taxable employee perks by the IRS.

Other kinds of presents given to dealers and passed on to workers, as well as meals and lodging provided by an employer to the employee and his or her family, are included.

Finally, make sure the presents are given for the appropriate reasons. The CRA has certain gift and award guidelines that must be followed closely.

A gift given for a birthday, religious holiday, or wedding does not have to be included in the employee’s income. If the present is given for reasons other than performance, such as an anniversary or retirement, its fair market value will be taken into account when determining the employee’s taxable compensation.

Stock Options Provided By Employers

Employers may provide their workers with shares in the business as a form of motivation to perform at their best given that they have a financial interest in it.

Giving employees stock in the firm is another approach to go about it. In this case, the stock will be taxed as a fringe benefit. Certain organizations are exempt from this, such as privately held corporations. You’ll need the assistance of an expert tax accountant to understand your options when giving staff stocks.