Is a Gift Card a "Gift"?

When is a gift card taxable income and when is it a nontaxable gift?

If you get a gift card from a friend then the gift card is not income because there is no business relationship. If you get a gift card from a child care parent this is more complicated.

If a child care parent gives you a gift card that is not payment for your services, this is a gift that is not income. So, if a parent says, "Happy Birthday!" or "Merry Christmas!" and gives you a gift card, this is not income to you.

However, if a parent says, "Thanks for the work you do for our family, here's a gift card," or "Here's a bonus" this is taxable income because it is extra payment for your services. I would treat the giving of gift cards around the holidays as non taxable gifts, even if the parent makes a comment thanking you for your services.

If a parent gives you a non-cash item such as a used toy, book, flowers, etc. treat such items as nontaxable gifts unless they are specifically made in lieu of payments for your services.

No matter who you get the gift card from, if you spend the gift card on something that is used in your business, you can deduct it under the normal rules of business deductions.

Tom Copeland – www.tomcopelandblog.com

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