Are they deductible?
An employee achievement award is an item of tangible personal property that an employer transfers to an employee for a length-of-service or safety achievement. It must be awarded as part of a meaningful presentation and under conditions and circumstances that don’t create a significant likelihood that the payment is disguised compensation. Your deduction for the cost of all employee achievement awards made to an employee in a tax year is limited to $400 if the award isn’t a qualified plan award and $1,600 if it is a suitable plan award. The employee does not include this type of reward in income.
Laws clarified that excludible employee achievement awards do not include cash or cash equivalents; gift cards, coupons or certificates; vacations, meals or lodging; tickets to the theater or sporting events; stocks, bonds and other securities; and other similar items.
Arrangements that confer only the right to select and receive tangible personal property from a limited array of items pre-selected or pre-approved by the employer (i.e., catalog of gifts) do qualify as excludible employee achievement awards.
