Yes, under the right circumstances, Christmas gifts count as taxable income. The holidays are still a wonderful time of year, but 30 percent of that magic of the season could belong to Uncle Sam. The line in which donations are converted to income, especially from an employer, can be confusing. Cash is generally considered a salary and generally does not provide any administrative burden to account for.
Therefore, cash cannot be a de minimis supplementary benefit. An exception is provided for the occasional money for meals or transportation so that an employee can work overtime. The benefit must be provided so that the employee can work an extended and unusual schedule. The benefit is not exclusive for any regular scheduled hours, even if it includes overtime.
The employee must actually work overtime. Cash or items equivalent to cash provided by the employer are never excludable from income. An exception applies to the occasional money for meals or transportation fees to allow an employee to work beyond normal hours. Gift certificates that can be redeemed for general products or that have an equivalent cash value are not de minimis benefits and are subject to taxes.
Non-monetary gifts and prizes awarded to employees can only be considered tax-free if the gift or award can be characterized as an additional “de minimis” benefit under Section 132 of the Code, or if it qualifies as an “employee achievement award” under Section 274 (j) of the Code. Fortunately, other types of non-monetary gifts (such as a ham, turkey, or a food gift) are considered “de minimus” and may be exempt from being reported on your income tax form. If you haven't received the gift other than for your employment (for example, an Amazon gift card that is given to all staff), it counts as income. While people would enjoy a tax-deductible charitable contribution for the gift and employees would prefer that the donation not be taxable for them, this type of “double immersion” is not usually the result.
Employers must increase employee income on Form W-2 and employees must recognize the gift as taxable income for any cash donation that is not a reimbursement of a legitimate business expense. Some small businesses give personal food gifts or gift cards, while others imitate larger companies that usually give the equivalent of one or two weeks' salary to their employees at this time of year. Gift tax is the tax on the transfer of assets, meaning that the tax applies regardless of whether or not the donor intends for the transfer to be a gift.
