Church Gift-Giving: How to Ensure Employee Gifts Are Tax-Compliant

Giving gifts to our employees can be one of the best ways to express our gratitude for a job well done. On the other hand, the laws surrounding what we give (and to whom) can make it a tricky business. Yes, it’s unfortunate that our generosity is somewhat tempered by tax laws, but fear not! The term de minimis – Latin for “trivial” or “insignificant,” may help.

Understanding De Minimis Benefits

Before you log on to buy those Amazon gift cards, let’s hit pause. Giving a gift card may be a nice way to keep the team feeling appreciated, but once a gift card or cash is given to an employee, it is considered taxable income. This rule applies even to small amounts and can complicate things, especially when given to volunteers.

Gift Cards and Cash: Taxable Income

A startling reality is that if your ministry gives a gift card or cash to a volunteer—no matter how small the amount—it is considered compensation. This can inadvertently categorize the volunteer as an employee, bringing with it wage requirements, tax withholding requirements, and other legal obligations. 

How Churches Can Give Tax-Free Employee Gifts

There are ways to beat that “bah humbug” audit! Gift giving that is random, rare, and otherwise non-monetary may be the perfect de minimis option.

Under Internal Revenue Code Section 132(a)(4), de minimis benefits are generally excluded from taxable income. These benefits refer to small items of no cash value that aren’t excluded under other provisions of the Code. Examples of such benefits typically valued under $100 annually include:

• Occasional snacks, coffee, doughnuts, etc.
• Holiday gifts (non-cash) (mugs, candy, pens etc.)
• Flowers, fruit, books, etc., provided under special circumstances
• Use of an office copier for personal reasons
• Promotional items like shirts, hats, or jackets with your logo

What Qualifies as De Minimis?

In determining whether a benefit is de minimis, you should consider its frequency and value. An essential element of a de minimis benefit is that it is occasional or unusual in frequency. It also must not be a form of disguised compensation. Currently, the standard for de minimis value is less than $100.

Balancing Generosity and Compliance

Navigating the rules surrounding employee gifts can be tricky. Still, with a clear understanding of taxable and non-taxable benefits, your faith-based organization can continue to show appreciation without running afoul of tax laws. Remember, the key to successful gift-giving is keeping it compliant and meaningful. Church HR Network can help your ministry navigate these complexities, ensuring that your gift-giving practices are generous and compliant with the law