I get that gifts from an employer to an employee are taxable, and there’s that $18k gift limit in general. But what if it’s a gift between two employees, where the one giving the gift is in a higher position than the one receiving it?
The giver is really grateful for the hard work this person puts in, which makes their own job a lot easier and improves their own pay. The company, though, doesn’t pay the recipient as much as the giver feels they deserve, and they’re thinking of giving them a decent-sized gift as a thank-you.
Is this just a gift between two people for tax purposes, or could it get complicated in other ways?
How would your company feel if they found out about this?
Even if it technically qualifies as a gift for tax purposes, things could get messy if there’s any negative feedback on either person’s performance later, or if someone questions the motive behind the gift. Your good deed could end up looking suspicious in the company’s eyes.
I’m guessing we’re talking about more than just a few gift cards for birthdays or special occasions?
@Zhen
Exactly. If it’s not coming from the company, it’s just a gift between the two of you.
Still, if there’s a supervisor-employee dynamic here, it might be wise to check the employee code of conduct or run it by HR. It could be fine, especially if you’re friends outside of work, but as a direct supervisor, it could raise questions.
A bit more background: This is actually a question from a friend who thought I’d know (though I’m a retired ecologist, not a finance expert). I told them I assumed it would be seen as a regular gift, but there could be some rule we don’t know about.
They work for a large nonprofit with a lot of bureaucracy. The person considering giving the gift thinks their teammate isn’t paid enough for their work, and they’re worried about losing them, as it takes years to train someone to this level in that role. They’re close but strictly professional and have been a solid team for years.
From the giver’s view, the idea is something like, “Here’s a bit of my income as a thank-you for everything you do, and hopefully, this helps make you feel appreciated.”
I’m not sure how the employer would react. My guess is they might worry it could make others in similar positions feel left out or make other supervisors look stingy.
I’m not a tax expert, but it sounds like it could just be a personal gift with no tax implications for either side, as long as it stays under the annual limit to avoid needing a gift tax return.
Skyler said:
I’m not a tax expert, but it sounds like it could just be a personal gift with no tax implications for either side, as long as it stays under the annual limit to avoid needing a gift tax return.
That’s what we’re thinking too, but there’s always the chance there’s something we’re missing.
@Skylar
I’d still treat it as a gift, but technically, it’s more like a tip. The money is being given as a ‘thank you’ for doing a good job at work, which normally would be considered income.
Noel said: @Skylar
I’d still treat it as a gift, but technically, it’s more like a tip. The money is being given as a ‘thank you’ for doing a good job at work, which normally would be considered income.
Lol this isn’t a tip. That would apply only if the giver acted as an employer, which isn’t the case here. This is just a personal gift between two people, nothing more.
This seems less of a tax issue and more of a workplace issue. It might be seen as inappropriate. If you think your colleague deserves more, maybe it’s better to try and advocate for them at work. This kind of gift could be misunderstood by other employees or even management.