Cash or non-cash items are sometimes given as a gesture of goodwill or appreciation or some other purpose not specifically related to regular job performance. Personal funds should typically be used for gifts to individuals for non-work-related personal achievements or events such as weddings, baby showers, housewarming, birthdays, holidays, etc. If university funds are used for personal gifts, the gift will be taxable to the individual receiving the gift based on the following guidelines below.
Staff Length of Service/Retirement Gifts
An employee must be in active service on his/her anniversary date to receive a length-of-service gift. The following length of service/retirement guidelines were developed according to IRS regulations. Gifts which adhere to the following parameters and are given to eligible employees are not subject to taxes:
- Timing - Gifts may not be made within the employee’s first five years of service or more frequently than every five years. Gifts given more often than these requirements will be taxable in full.
- Dollar Limit – The value or cost of the gift should not exceed $400. It is also recommended that the value or cost of the gift commensurate with the number of years of service being recognized (e.g., the 15-year service gift is greater than the 10-year service gift). Length of service or retirement gifts with a value or cost over $400 will be taxable to the extent the value or cost exceeds the dollar limit (e.g., if a $450 gift is given, then $50 will be taxable).
- Form of Gifts - In order to avoid taxable income, the gift must be in the form of tangible personal property. The IRS does not consider gift certificates to be tangible personal property, and accordingly, they are subject to tax. If the gift is in the form of cash, check, gift card or gift certificate, vacation, meals, lodging, theater or sports tickets, or securities, the value of such item is treated as additional wages and taxable regardless of the amount.
- Meaningful Presentation – The gift must be presented as part of a special event or celebration that marks the occasion, such as a departmental meeting, party or luncheon/dinner.
- Conditions and Circumstances – The gift must be under conditions and circumstances that do not create a significant likelihood of disguised compensation.
To ensure that gifts are not taxable to the recipient(s), departments must follow the IRS regulations below:
- Dollar Limit - The aggregate gift value should not exceed $75 per individual. If the value of the gift(s) exceeds $75, then the entire gift will be taxable.
- Frequency - Gifts should only be given on an occasional basis. Gifts given on a regular or routine basis (daily, weekly, monthly, and quarterly) do not qualify for nontaxable treatment and must be reported as taxable income.
- Example - An employer gives employees snacks each day valued at 75 cents. Even though small in amount, the benefit is provided on a regular basis and is, therefore, taxable as wages.
- Non-Cash Gift – The gift must be personal property (e.g., mugs, trophies, t-shirts, plaques, etc.).
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