The Tax Questions Blog

Posts Tagged ‘gift certificates taxable income’

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Question: If a friend gives you a large sum of money as a gift, is that taxable income?

Answer: Lucky you! The recipient of a gift doesn't pay tax. If the gift is over $11,000, the person who gave it to you may owe gift tax. So, the good news is that you've just received money tax free. Thank your friend profusely and take him/her out for a fine dinner!

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Question: gift cards ,at what amount do they become a taxable benifit?

We receive a gift certificate for $500 for perfect attendance,I would like to know at which point is the optimum amount before it has to be taxed

Answer: I'm sorry to say that because you have received a gift card, it is 100% taxable. In order to avoid paying taxes, your employer needed to give you TANGIBLE goods. Meaning, an item. A gift card is equivalent to cash, so to speak and therefore it is taxable. Should you elect to return the gift card to the employer and instead take ..........oh, a television for example.. or something worth less than $500, it is not taxable in the least.

So what I am telling you is to return the gift card and instead ask for something worth $499. Anything $500 or greater is taxable.

I hope this helps. Just remember to pick out something that is tangible. Even if you have to make up the last little bit with a big package of prime rib at Costco, after you've chosen your item, that's still tangible.

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