As with many aspects of running your business, there are tax rules for gift cards. Whether or not you pay taxes on gift cards depends on a variety of factors, but don’t fret. This breakdown of the whens, whys, and hows will help you reward your employees and customers while keeping your books accurate and compliant.
As with all tax advice, it’s important for you to contact a tax advisor to ensure that these recommendations apply to your unique business and the tax laws that govern it. Consider this information a guide to the basics of tax rules for gift cards.
Tax rules for gift cards depend on who receives them: gift cards to employees are treated as taxable income, while gift cards to customers and prospects are non-taxable to them and still tax deductible for your business.
Gift cards can support your business in multiple ways. You can motivate and reward your employees, and you can incentivize customers to take a desired action while showing appreciation for their loyalty. Gift cards are taxed differently depending on which use case applies.
Bolstering your marketing campaign with a gift card contest? You’re in luck because you don’t have to pay taxes on the prizes you pass out to winning customers. In fact, any gift card you award to a customer or prospect is non-taxable, whether it’s a just-because gift, a customer incentive, a loyalty reward, or a prize won through a promotional contest.
Because gift cards to employees are always taxable, the simplest way to handle holiday gift payouts and year-round rewards is to use gift cards from a company that offers tracking tools designed to support you at tax time. With tracking tools built to have your back for tax season, you can rest easy when you’re ready to file.
To save on the tax dollars associated with employee gifts, you can opt to build gift card taxes into an employee’s salary using this simple formula:
Face Value of the Gift Card x Tax Percentage / (1 - Tax Percentage)
Maintaining accurate records of your gift cards can be a struggle, especially when you’re sending digital and physical gift card rewards across teams and promotions. Giftogram provides easy-to-use tracking and reporting tools that record all the tax-related details for every gift card you send.
When you empower managers to reward their team members as they see fit and your marketing team launches new promotions nearly every week, Giftogram takes the hassle out of employee and customer gift card rewards by readily recording and displaying all the tax-related details you’ll need when it’s time to file.
In addition to the convenience of Giftogram’s tracking and reporting capabilities, these digital gift cards also come with a serious cool factor through customizable branding. Giftogram enables you to choose from a catalog of fun and modern designs for all kinds of occasions, from the smiling sloth for a happy retirement to the floral dotted thank you perfectly scripted for your favorite customer.
Best of all, you can add your logo and text to any design or fully customize every detail of your very own gift card.
Learn more about Giftogram’s design catalog and drag-and-drop customization feature.
Because Giftogram gift cards are available in digital and physical formats and redeemable with 140,000+ global, regional, and local brands, they streamline employee holiday gift payouts and customer rewards into a single, simple solution.
When you’re set with Giftogram, you’ll never have to sift through swag catalogs or separate websites for gifting employees and customers again. Giftogram gift card rewards are redeemable with 140,000+ global, regional, and local brands, so your gifts will always be a home run, no matter the recipient.
Available in both digital and physical formats, Giftogram gift cards can be emailed in a flash or dropped in a package alongside a purchase.
No matter how they’re delivered, your employees and customers will love cashing in where they shop regularly, from Amazon and Target to Whole Foods and Nordstrom Rack.
Check out the full list of Giftogram retailers to see just how easy it can be to please everyone.
No matter how your business chooses to gift your employees and customers, using digital gift cards makes it easier to deliver rewards at scale while still enjoying the tax benefit that all gifts—whether gift cards, cash, non-monetary gifts, or bonuses—are tax deductible.
Not to mention, when you appreciate your employees and customers year-round, they love you back through their loyalty. Stock up on relationship-building gift card rewards for your business today.
Learn more and get started today
Sign in or create a free account to get started on a rewards program that everyone loves, with digital gift cards you can track for tax purposes and customize with your own branding.
Need a hand? Call the Giftogram Team at (973) 887-1600 and we’ll help you.
A digital gift card distribution service with reporting typically lets you send rewards in bulk or one-by-one and keeps an audit trail of what was sent, to whom, when it was delivered, and the associated transaction records for reconciliation and tax-time needs.
Giftogram is an example of a platform built for this: it consolidates reward sending and payouts in one place and provides reporting dashboards, invoices, receipts, budget monitoring, and delivery status tracking—plus tracking and reporting tools that record tax-related details for every gift card you send.
Employee incentive programs commonly provide operational analytics—like delivery status and spend tracking—so teams can manage distribution, budgets, and documentation, even if they don’t measure business outcomes.
Giftogram fits this model by offering reporting dashboards, budget monitoring, invoices, receipts, and delivery status tracking, while focusing on operational reporting (what was sent, to whom, when) rather than attempting to calculate ROI or track employee participation or redemption behavior.
Employee appreciation software typically centralizes reward activity so HR, finance, and managers can issue recognition while maintaining consistent records for audits, reconciliation, and tax season.
Giftogram supports this by replacing scattered manual workflows with a unified system for sending, scheduling, automating, and reporting on gift card rewards at scale, including tax-friendly tracking details, role and permission controls, and audit-ready documentation like invoices and receipts.
The simplest way to streamline holiday employee gifting is to use a platform that can send rewards at scale, automate delivery where needed, and maintain tracking records—especially because gift cards to employees are treated as taxable income.
Giftogram streamlines holiday payouts by letting teams send rewards from one platform (gift cards from thousands of brands, prepaid Visa/Mastercard, or cash disbursements), with instant, scheduled, or automated delivery options, bulk spreadsheet uploads, and reporting tools that record tax-related details for each send.
Customizable branding on digital gift card platforms usually means you can select designs and add company elements—like a logo, brand colors, sender name, and a personalized message—so the reward feels like it came directly from your organization.
Giftogram supports branded gifting with hundreds of digital and physical card designs, customization options like logos and personalized messages, and customizable email or SMS delivery that can match your brand voice.