A holiday party open to all employees is not a taxable benefit if it costs $150 or less per person, including taxes. Non-cash gifts are not taxable up to a combined $500 per employee per year. Cash and near-cash gifts, including most gift cards, are always taxable and go through payroll.
Why does it matter whether a gift is taxable?
When an employer gives an employee something of value, the CRA's starting point is that it is a taxable benefit: part of the employee's pay. A taxable benefit has to be reported on the employee's T4. The CRA makes exceptions for parties, small gifts and long-service awards. Staying inside those exceptions means your thank-you stays a thank-you, with nothing to add to anyone's slip. Stepping outside them is not a disaster, but it is paperwork you want to plan for rather than find in February.
Is a holiday party a taxable benefit?
Not if it meets the CRA's conditions. An employer-paid social event is not a taxable benefit when it is open to all employees and costs $150 or less per person, including taxes (CRA: Social events). A few details matter when you work out the cost per person:
- Guests count. If spouses or partners attend, their cost is part of the total.
- Getting home safely does not count. Transport home, such as taxis, and hotel rooms are left out of the $150 calculation.
- It is not one party a year. The CRA allows up to six employer-paid social events a year.
- Virtual events have their own limits. For a virtual party, the limit is $50 per employee for food and drink, or $100 if entertainment is included.
If the cost goes over the limit, the event no longer qualifies and becomes a taxable benefit to the employees who attended. Check the CRA page before you book, and keep the invoices.
Are non-cash gifts to employees taxable?
Non-cash gifts and awards are not taxable up to a combined $500 in fair market value, including taxes, per employee per year. Above that, the excess is taxable (CRA: Gifts, awards and long-service awards).
- "Combined" is the word to watch. A holiday hamper, a birthday gift and a thank-you item in the same year all count toward the same $500.
- Trivial items do not count. Small things with company branding, such as mugs, T-shirts and plaques, are left out of the total.
- The rule is for employees you deal with at arm's length. Gifts to family members who work in the business, or to shareholders, follow different rules.
Why are gift cards taxable?
Because the CRA treats cash and near-cash gifts as taxable, whatever the amount. Near-cash means something that works like money, and most gift cards fall into that group. That surprises a lot of employers, because a gift card feels like a gift. In the CRA's view it is closer to a cash bonus. It goes on the employee's T4 like any other pay. If you want a gift to stay non-taxable, give an actual item rather than a card, and keep the combined value for the year under the limit.
What about long-service awards?
Long-service awards have a separate limit. A non-cash award for five or more years of service is not taxable up to $500, including taxes, as long as at least five years have passed since the last one. The two limits do not mix. If you do not use the full long-service amount, the unused part cannot be moved over to the gifts limit.
Three common situations
- A gift card for everyone. Even a small card is near-cash, so it is a taxable benefit for each employee and goes through payroll. If you want the gesture without the paperwork, choose a physical gift instead.
- A hamper in December and a gift on a work anniversary. Both are non-cash, so they count together toward the same $500 for the year. Add up the cost of each, including taxes, before you buy the second one.
- A team dinner with partners invited. Divide the full bill, including taxes and the partners' share, by the number of employees attending. If it is $150 or less per person and every employee was invited, it is not a taxable benefit. The taxi home is left out of the sum.
In each case, the deciding questions are the same: is it cash or near-cash, what did it cost including taxes, and was everyone invited?
Quick reference
| Item | Rule |
|---|---|
| Holiday party, open to all employees | Not taxable at $150 or less per person, including taxes. Up to six events a year. |
| Virtual party | $50 per employee for food and drink, $100 with entertainment. |
| Non-cash gifts and awards | Not taxable up to a combined $500 per employee per year. |
| Long-service award | A separate $500, for five or more years of service. |
| Cash and near-cash, including most gift cards | Always taxable. |
What should you record?
Keep the party invoice and a headcount, so the cost per person can be shown. For gifts, keep a simple list: who received what, when, and what it cost. That list is what tells you, and whoever does your year-end, whether anyone went over the limit. Any taxable gift or benefit needs to reach payroll before the year closes, so it lands on the right T4. T4 slips and the summary are due by the last day of February after the calendar year (CRA).
What to do next
Before you book the party or buy the gifts, work out the cost per person and decide between gift cards and non-cash gifts with the rules above in mind. If you are not sure how a gift or event should be handled on payroll, book a free consultation and we will go through it with you.
Sources
- CRA: Social events — read 5 November 2026
- CRA: Gifts, awards and long-service awards — read 5 November 2026
- CRA: 2026 tax deadlines for businesses and self-employed individuals (T4 slips) — read 5 November 2026
This guide explains published CRA rules. It is general information, not advice about your situation. Rules change — check the CRA page before acting on anything here.
