Should you be an Oprah or a Scrooge when it comes to gift giving? Our tax experts weigh in.
It’s the age old internal debate. Who gets a holiday gift and where do I draw the line? Well, they say it’s better to give than receive and we couldn’t agree more. So, if you’re feeling generous, you need to keep one thing in mind. Whether you’re gifting family, friends, employees or registered charities, there may be tax implications you haven’t considered.
Lucky for you, we’ve made life easy by making a list of three tax considerations for giving gifts.
1. Gifts to registered charities that give you all the feels.
Donating to your charity of choice doesn’t just make the world a better place. It can also help you get a bigger tax refund. It’s the gift that keeps on giving. You may be able to claim the entire amount donated when you file your tax return, as long as you receive and keep an official donation receipt from the institution.
One thing to remember is that if you got a gift back from that charity in appreciation of your donation, the amount you can claim changes. For example, let’s say you donate $500 to your registered charity of choice. In gratitude, they gift you tickets to a hockey game valued at $100. The amount you’ll be able to claim is the difference between your gift and theirs, which in this example means you can claim $400.
To find out if your charity of choice may issue official donation receipts, the Canada Revenue Agency (CRA) has a great chart you can reference.
2. Gifts to employees, from jelly of the month club to cash bonuses.
If you’re an employer, you may be thinking about quarterly, half year or year-end bonuses. There are certain guidelines you’ll want to be mindful of before you write that cheque or wrap that gift. You may give your employees up to $500 of non-cash gifts in a year before it becomes taxable. If the value is more than $500, then the difference will be added to their employment income on their T4 slips. If you give your employees straight cash or gift cards, the full amount will be taxable regardless of how big or small it is. Overall, it’s a good idea to let them know if their bonus will impact their taxes.
3. The gift of cold, hard cash.
So, you waited until the last minute and now it’s too late for Amazon delivery and there’s no time to head to the mall. What do you do? You decide giving cash is your best solution – but are there any tax implications for slipping your nephew a crisp $20 bill in his stocking? In Canada, there are no tax implications for either you or your nephew, as long as it’s not an income-earning gift.
In the end, there’s no time like the present (see what we did there?) to get gifting and show your appreciation for those around you.
Looking for more information on gifts and their implications? A tax expert at H&R Block can answer any tax questions you may have. Find an office near you, or get an expert review with our tax software to ensure you’re accounting for gifting accurately.