Tax-Free Benefits: Non-Cash Gifts Under $500

A gift (either in cash or in kind) from your employer is an employment benefit. However, non-cash gifts and non-cash awards to an employee for the year with a total aggregate value less than $500 is non-taxable. The total value in excess of $500 annually will be taxable.

In addition, a separate non-cash long service/anniversary award may also qualify for non-taxable status to the extent its total value is $500 or less. The value in excess of $500 will be taxable. In order to qualify, the anniversary award cannot be for less than five years of service or be gifted less than five years since the last long service award had been provided to the employee.

For the purposes of applying the $500 thresholds, the annual gifts and awards threshold and the long service/anniversary awards threshold are separate.

Items of an immaterial or nominal value, such as coffee, tea, T-shirts with employer logos, mugs, plaques, trophies, etc., will not be considered a taxable benefit to employees. There is no defined monetary threshold that determines an immaterial amount. Factors that may be taken into account include the value, frequency, and administrative practicability of accounting for nominal benefits.

Excerpted from Essential Tax Facts: 2013 Edition, by Evelyn Jacks.©Knowledge Bureau Newsbooks. All rights reserved.