At some point, an employer may want to give a gift to their nanny, elder caregiver, housekeeper, or other household employee. While this is thoughtful, if one is not careful they may end up paying additional taxes at the end of the year on the value of the gift.
By following a few simple rules and regulations set forth by the Canadian Revenue Agency (CRA), an employer can give a their hardworking employee a gift and skip additional taxes.
Know when you can give gifts tax-free and the value limits
In order to give a gift without additional taxes involved, it must be given for a certain reason. CRA approved reasons to gift tax-free include an employee’s birthday, religious holiday, their wedding, or the birth of their child. Over the course of the calendar year, one can gift up to $500 in non-cash gifts on any of the CRA approved days. If the gifts over the year are valued at more than $500, additional taxes could be imposed on the difference.
Cash, gifts cards, and near-cash gifts are ALWAYS taxed
Many people like to choose gift cards so that the recipient can choose the gift they want. While in everyday life this is perfectly fine, when it comes to gifting employees this is a no-no. Cash, gift cards, and near cash gifts are always taxed. A near cash gift is any gift that allows the employee to pick out his or her own gift.
Instead of giving your household employee a gift certificate to the movies, gift them movie tickets. Instead of a gift certificate to the bath store, create a basket full of lotions or candles from the store. You can always tuck in a gift receipt with items so that your employee can exchange the gift if it’s something he or she doesn’t like.
Gifts that are exempt from taxation
Those wanting to give a gift to their employee just because, but don’t want to pay taxes on the gift should consider one of the items that are always exempt from taxation. The CRA has a list of gifts that can be given at any time for any reason that are never taxed. Items on the list include coffee, coffee mugs, tea, plaques, and shirts that have a company logo on them.
Want to give a gift just because your household employee is awesome? Consider creating a basket of their favorite coffees and teas along with a mug. If the employee is a nanny or caregiver, have your kiddos design or paint a t-shirt for him or her and call it your family logo.
Deborah Shure is the owner and founder of NannyTax, the premier nanny payroll service in Canada. With over 25 years of combined financial experience, Deborah and her team are the most trusted source of nanny payroll information. When she isn’t busy providing “nanny tax frustration relief”, Deborah is spending time with her 3 kids doing all the things that supermoms do!