Are Employee Gifts Tax Deductible?

Now that in-person celebrations have become more of the exception to the rule, many of our clients have been leaning on our custom corporate gifting services to help them show appreciation and strengthen connections with their employees throughout the year. Many are curious though, are employee gifts tax deductible?

You asked, and we summarized! Keep reading to find out what the Canada Revenue Agency has to say about whether or not employee gifts are tax deductible. 

  • What CRA says: Cash and near-cash gifts or awards are always a taxable benefit for the employee
    What it means: Cold hard cash and gifts that work like cash (think gift cards, certificates, or vouchers) should be counted as income that is subject to deductions
  • What CRA says: You may give an employee an unlimited number of non-cash gifts and awards with a combined total value of $500 or less annually. If the fair market value (FMV) of the gifts and awards you give your employee is greater than $500, the amount over $500 must be included in the employee's income. 
    What it means: If you spend more than $500 on gifts for any one employee, the amount exceeding $500 should be counted as a taxable benefit. For example, if you give gifts and awards with a total value of $650, there is a taxable benefit of $150 ($650-$500).
  • What CRA says: Items like coffee or tea, t-shirts, mugs, and plaques or trophies do not count
    What it means: Working with our curators to create custom boxes filled with our go-to items will ensure you spoil your employees without approaching the $500 non-cash gift limit. 

  • What CRA says: As well as the gifts and awards in the policy stated under Policy for non-cash gifts and award, you can, once every five years, give your employee a non-cash long-service or anniversary award valued at $500 or less, tax free.
    What it means: If you’re hoping to celebrate company loyalty by going big for employees for every 5 years of service, you’re in luck. Once every 5 years you can give a non-cash gift valued up to $500 in addition to the already-allotted $500 limit for other non-cash gifts that year without any deductions.

We hope that this gave our Canadian business leaders some digestible information on whether or not employee gifts are tax deductible. If you’re looking to learn more about the policies pertaining to employee gifts and rewards, visit the CRA policy page here

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