Tax Implications of Holiday Bonuses, Gifts, and Charitable Giving
The holiday season is a time of giving, but it’s important to understand how holiday bonuses, gifts, and charitable donations impact your taxes. Here’s what you need to know:
Employee Bonuses: If you’re an employer, holiday bonuses are considered taxable income for your employees and must be reported on W-2 forms. As the giver, you can deduct these as a business expense.
Gifts to Clients and Employees: Business-related gifts are deductible, but there’s a $25 limit per client. For employees, consider tax-free perks like gift cards under $25 or holiday parties.
Charitable Contributions: Donations to qualified charities can reduce your taxable income. Be sure to keep receipts and follow IRS rules to claim the deduction.
Non-Cash Donations: Gifting items such as clothes or toys? Document the value of your donation and ensure the receiving charity provides a receipt.
Navigating these rules ensures your generosity doesn’t lead to unexpected tax surprises. Want help planning your holiday tax strategy? Tax Pros HQ is here to assist!
