Must-know tax rules for employee gift cards

Emily Patz
Emily Patz
Posted February 23, 2022 in Employee Gifts & Incentives

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 get a handle on rewarding your employees and customers while balancing the books above board.

As with all tax advice, it’s important for you to contact a tax advisor to ensure that these recommendations can apply to your unique business and the tax laws that apply. Consider this information as a guide to the basics of tax rules for gift cards.

Tax rules differ depending on the recipient

Gift cards can be used by businesses in multiple ways. You can motivate and reward your employees, and you can incentivize customers to take a desired action, along with showing them how much you appreciate their patronage. Gift cards are taxed differently depending upon which use case applies.

Tax rules for gift cards to customers and prospects

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.


Tax rules for gift cards to employees

Gift cards to employees are always taxable, but following the rules doesn’t have to be time-consuming or complicated. By investing in gift cards from a company that offers tracking tools designed 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

3 big benefits of Giftogram gift cards and rewards for employees and customers

Manage gift card transactions with Giftogram’s reporting tools

Maintaining accurate records of your gift cards can be a struggle, especially when you empower managers to give them to their team members as they see fit and new marketing promotions launch nearly every week. Fortunately, Giftogram takes the hassle out of employee and customer rewards by providing your business with easy-to-use tracking and reporting tools that readily record and display of all the tax-related details you’ll need when it’s time to file


Make Giftogram gift cards your own

In addition to the convenience of Giftogram’s tracking and reporting capabilities, these cards also come with a serious cool factor. 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.

Find the perfect gift for everyone

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 rewards are redeemable at hundreds of popular retailers nationwide, 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.

Rewarding your employees and customers is always a win-win

No matter how your business chooses to gift your employees and customers, there’s always a tax benefit. That’s because all gifts to your employees and customers, 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 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. Need a hand? Call the Giftogram Team at (973) 887-1600 and we’ll help you!