Holiday Office Party Taxes: Know Before You Go
The IRS could tax your gifts from Christmas raffles, Secret Santa, and White Elephant. Here’s how.


As the winter season approaches your employer may want to hold the annual office party. But what does that mean to your taxes? Winning the yearly costume contest may come with a hidden cost. Or, you could be subject to withholding on the annual door prize.
We’ll look at holiday work parties from the employee perspective to see how much tax you could be paying out of your paycheck — unknowingly.
When are work gifts not taxable?
First, let’s explore tax-free employer presents. These gifts are generally not taxed if they are deemed “de minimis,” which means:

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
- Low in cost (like Christmas turkeys, books, candles, or chocolates) AND
- Infrequent in use (like tickets or a gift certificate for a particular item)
The IRS hasn’t set a strict dollar amount for “low in cost,” though anything over $100 isn’t considered meeting the definition. Entertainment tickets could be de minimis if they are less than $100 and used infrequently.
For example, if your company has a raffle ticket to see “The Nutcracker,” that may be de minimis. The ticket can only be used infrequently and for something specific (i.e. the night of the ballet).
However, if the office raffle is for a season pass to the theater, that would be taxable because there is frequent use. Or, if the ticket is worth more than $100, that would also be taxable.
As you can see from the above examples, “de minimis” may be quite limited. What’s worse, we haven’t yet covered the most popular present given: gift cards.
Gift cards and other employee presents that are taxed
Did you know when you unwrap a gift at work the IRS has essentially already unwrapped it for you?
Employers withhold Social Security tax and other payroll taxes on many gifts you receive — and yes, that includes the occasional gift card.
That’s because all gift cards are generally excluded from “de minimis” since they have a direct cash value. Other examples of taxable gifts include:
- Those worth more than $100, which may be exchanged in Secret Santa or White Elephant
- Recurring presents, like a weekly self-care package
- Cash, prepaid cards, and Christmas bonuses
Taxes you receive on the above contribute to a higher withholding on your Form W-2 at year-end. What’s worse, presents like gift cards are historically underspent. This means you could be paying taxes on something you’ll never use.
So, if you have a choice in accepting a present, consider the tax implications first, especially if the gift is large. You don’t want a surprise on your year-end tax return.
But note: the above list isn’t exhaustive. Withholding on prize-based games can easily be missed, especially if you receive holiday winnings from a craft fair or similar event. Read on.
Are holiday office prizes tax-free?
The IRS considers winnings from bingo, trivia, charades, raffles, and lotteries taxable. That’s true even if the prize is small.
Your employer is responsible for withholding the appropriate taxes on your year-end tax form. But any prizes won outside the workplace, like those you win from church or a holiday fair, are reportable by you. In other words, the responsibility to pay taxes on these winnings falls on the individual.
This means you may need to follow up with the appropriate organization for tax forms or you could risk a penalty for underfiling.
For more information on how to report these winnings, see Kiplinger’s report, Taxes on Gambling Winnings and Losses.
Ideas on how to throw a party with no tax withholding
As we’ve seen, your annual work party may come with a hidden price tag due to unforeseen tax implications. So, how can you potentially avoid a holiday tax?
As an employee, try to get an early jump on planning. If your company sends out an email asking for suggestions, offer a prize-free party with one of the below options instead:
- A silly holiday photo booth with props like candy canes and snowmen
- Bring-your-own gingerbread house decorating party
- Holiday potluck or office lunch
The above could have fewer W-2 withholdings while still providing festive enjoyment. Free can be fun: the proof is in the pudding.
Related Content
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.

Kate is a CPA with experience in audit and technology. As a Tax Writer at Kiplinger, Kate believes that tax and finance news should meet people where they are today, across cultural, educational, and disciplinary backgrounds.
-
Investing Abroad Could Pay Off — Here's How
Countries overseas are stimulating their economies, and their stocks are compelling bargains.
-
Retire in Belize for Stunning Natural Beauty and Culture
Belize offers miles of protected land and ocean, a rich mix of cultures and a chill lifestyle. Best yet — the income requirement is just $2K per month.
-
2025 SALT Cap Could Hurt Top 'Hidden Home Cost'
Tax Deductions The latest GOP tax bill might make hidden homeowner costs worse for you. Here’s how.
-
Retire in the Bahamas With These Three Tax Benefits
Retirement Taxes Retirement in the Bahamas may be worth considering for high-net-worth individuals who hate paying taxes on income and capital gains.
-
2025 Virginia Tax Rebate Checks Coming Soon? What to Know Now
Tax Rebates Given a historic 2025 gubernatorial race, tax policy will remain a key issue for Virginians in the months ahead.
-
Summer Backyard Ideas With Added Tax Benefits for 2025
Tax Tips Find out how these summer 2025 home projects can help you save on taxes next year.
-
Coverdell ESAs vs. 529 Plans: Which Should You Choose?
Savings Accounts These savings accounts can offer tax benefits for school and retirement expenses. Here’s how.
-
Homeschoolers Could Soon Save on Expenses With 529 Plans
Savings Accounts A new House GOP bill could change how you save for your child's homeschool education. Find out how.
-
Five ‘Big Beautiful Bill’ Tax Changes to Watch in the Senate
Tax Policy The House passed its version of Trump’s "One Big, Beautiful Bill." Here’s what to look for as Senate Republicans take up the mega legislation.
-
New GOP Car Loan Tax Deduction: Which Vehicles and Buyers Qualify
Tax Breaks To fulfill Trump's campaign promise, GOP lawmakers want to offer a tax deduction for car loan interest. How would it work?