â€˜Tis the season for giving! During this time of the year small business owners like to show appreciation to their staff. Office Christmas parties and gifts to employees are the most common ways of demonstrating gratitude. There are tax implications that need to be considered before doing either of these for your employees.
You are allowed to have up to 6 staff parties per year, but everyone must be invited for it to be 100% deductible. If everyone isnâ€™t invited the party is only 50% deductible. As well, the cost cannot be over $100/employee at the party or there may be a taxable benefit to the employee to be reported on their T4.
Gift cards and cash gifts must be reported as income on an employeeâ€™s T4. However, tangible gifts up to $500 for the year are not taxable to the employee. This may be a great way to keep your employee happy come tax time if you were only going to spend $500. If you want to give something of more value to your employee such as an iPad for Xmas with a value of $800, $300 would be considered a taxable benefit and would need to be reported on their T4.
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