Your Tax Guide To Holiday Office Parties

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As the winter season approaches your employer may want to hold the annual office party. But what does that mean to your taxes? Winning the yearly costume contest may come with a hidden cost. Or, you could be subject to withholding on the annual door prize.

We⁘ll look at holiday work parties from the employee perspective to see how much tax you could be paying out of your paycheck ⁘ unknowingly.

First, let⁘s explore tax-free employer presents. These gifts are generally not taxed if they are deemed ⁘de minimis,⁘ which means:

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The IRS hasn⁘t set a strict dollar amount for ⁘low in cost,⁘ though anything over $100 isn⁘t considered meeting the definition. Entertainment tickets could be de minimis if they are less than $100 and used infrequently.

For example, if your company has a raffle ticket to see ⁘The Nutcracker,⁘ that may be de minimis. The ticket can only be used infrequently and for something specific (i.e. the night of the ballet).

However, if the office raffle is for a season pass to the theater, that would be taxable because there is frequent use. Or, if the ticket is worth more than $100, that would also be taxable.

As you can see from the above examples, ⁘de minimis⁘ may be quite limited. What⁘s worse, we haven⁘t yet covered the most popular present given: gift cards.

Employers withhold Social Security tax and other payroll taxes on many gifts you receive ⁘ and yes, that includes the occasional gift card.

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