Employee Holiday Gifts and Parties: What's Tax-Free Under IRS De Minimis Rules (2026)
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How we wrote this: A plain-English summary of IRS Publication 15-B (2026), Employer's Tax Guide to Fringe Benefits, checked October 29, 2026. This is general information, not tax advice.
The de minimis rule
Pub. 15-B lets you leave a de minimis benefit out of an employee's wages. This is property or a service worth so little (considering how often you provide it) that accounting for it would be unreasonable or administratively impracticable. The IRS doesn't set a dollar limit for these gifts.
IRS examples that fit the season:
- Holiday or birthday gifts, other than cash, with a low fair market value, such as a holiday ham or a fruit basket.
- Flowers, fruit or similar items given for special circumstances like illness, a family crisis or outstanding performance.
- Occasional parties or picnics for employees and their guests.
- Occasional theater or sports tickets (but season tickets don't qualify).
Gift cards are never de minimis
Pub. 15-B is blunt: cash and cash equivalents, including gift certificates, gift cards and use of a charge or credit card, are never excludable as a de minimis benefit, no matter how small. A $25 gift card is taxable wages. Withhold and report it like a bonus (see holiday bonus withholding). Pub. 15-B says you can add taxable fringe benefits to regular wages or withhold at the flat 22% supplemental rate.
If a benefit doesn't qualify as de minimis, the whole value generally counts as income, not just the amount over some threshold.
Deducting the holiday party
Pub. 15-B says food and drink for employee recreation, such as holiday parties or annual picnics, remain 100% deductible when they're mainly for employees who aren't officers, owners with 10% or more, or other highly compensated employees.
Note the separate change for 2026: for amounts paid after 2025, employers generally can no longer deduct food and drinks provided through an on-premises eating facility or for the employer's convenience. There are limited exceptions.
Quick guide
| Gift | Taxable to employee? |
|---|---|
| Holiday ham, fruit basket, small non-cash gift | Usually no (de minimis) |
| Gift card or cash, any amount | Yes |
| Occasional holiday party | No |
| Season tickets | Yes |
For gifts to clients and customers (a different rule), see business gifts tax rules.