With the holidays right around the corner, many people are already purchasing gifts and gift cards for their friends, family, and loved ones. One person that leaves many people stumped in the gift department is the babysitter or caregiver. You want to choose a gift that shows your appreciation for the employee’s hard work and dedication; however, you don’t want to choose the wrong gift and end up paying additional taxes to the Canadian Revenue Agency (CRA). Fear not! As long as you follow a few simple rules, you can choose a fabulous gift that isn’t taxing.
Know the tax-free gifting rules and limit!
The CRA states that every gift an employer gives to their employee is taxable, unless there is an approved reason for the gift. Approved reasons include religious holidays, the caregiver’s birthday, their wedding, or the birth of their child. Having an approved reason to give a gift allows employers to give a caregiver, babysitter, nanny, or other employee up to $500 in acceptable non-cash gifts annually before they become taxable.
Skip cash and gift cards, and instead buy an actual item!
Many people think that cash and gift cards are the way to go, but these are just two of the items that will have families coughing up extra money in taxes. The CRA states that cash, gift cards, gift certificates, store/travel points, and any type of gift that allows the employee pick their own gift from many items are always taxable. Instead of giving your caregiver a gift certificate to her favorite candle or beauty store, tax savvy people give an actual item from the store. Not sure which item she would like? Bring up the store casually in a conversation, or pay attention to the items she currently uses. You can always tuck in a gift receipt so that she can trade the item if needed. Buying an actual item is a great way to skip additional taxes.
There are a few small goodies that are never taxed!
The rules set out by the CRA can be confusing, and some people may feel like giving up when it comes to finding a non-taxable gift. Thankfully, some items can be gifted without any sort of taxation. The CRA states that tea, coffee, coffee mugs, plaques, and t-shirts with a company logo are never taxed. This means you can whip up a gourmet basket of coffee or tea, tuck in a cute mug, and not have to worry about additional taxes. Make a customized plaque of appreciation from your family for your caregiver, or allow the kiddos to create a t-shirt and put your family logo on it. Your logo can be as simple as your family surname, or even just the kiddos handprints.
Giving a holiday gift to your caregiver shows them that you appreciate all they do for your family. It makes them feel cherished, appreciated, and like an extended member of the family. With a little thought, you can find a gift they will love that won’t have either of you paying additional taxes.
NannyTax is Canada’s first and longest serving nationwide business dedicated to nanny payroll tax solutions. We do the math, so you don’t have to! Visit NannyTax today and let us know what we can do for you!