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Q. Our local municipal government provides $25 gift cards for our employees at Christmas. Are these gift cards taxable? D.O., Martinsville, Va.

A. Yes. The IRS views a gift card just like a gift of cash. Because it does not qualify as a “de minimis” fringe benefit of nominal value—for example, the gift of a Christmas ham or turkey—the gift card received by an employee is taxable as compensation to the employee and deductible by the organization. Other awards to employees may be tax-free under special programs.

Tip: Don’t be confused by the rules for business gifts to clients. An employer may give each client up to $25 tax-free.

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