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
Get Kiplinger Today newsletter — free
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.
-
Can the 'Guardrails Approach' Protect Your Retirement Investments?
This investing method helps retirees avoid running out of money, even in a highly volatile market.
By Simon Constable
-
Social Security Is Taxable, But There Are Workarounds
If you're strategic about your retirement account withdrawals, you can potentially minimize the taxes you'll pay on your Social Security benefits.
By Todd Talbot, CFP®, NSSA, CTS™
-
Ten Cheapest Places To Live in Florida
Property Tax Make your Florida vacation spot daily living — these counties have the lowest property tax bills in the state.
By Kate Schubel
-
Missed Tax Day? Nearly One Million Taxpayers Still Can File and Claim Valuable Tax Refunds
Tax Refunds As many as one million taxpayers could be missing out on a significant tax refund.
By Gabriella Cruz-Martínez
-
Which Generation Pays the Most Tax in the US?
Tax Burden Polls show that most people feel like taxes are unfair. But which age group bears the brunt of the tax burden in the United States?
By Kelley R. Taylor
-
Tax Day 2025: Don’t Miss These Freebies, Food Deals and Discounts
Tax Day You can score some sweet deals on April 15 in some select restaurants like Burger King, Shake Shack, and more.
By Gabriella Cruz-Martínez
-
Tax Time: Does Your Kid Influencer Owe Taxes?
State Tax Some minors are making big money on social media. Here’s how to know if they need to file taxes.
By Gabriella Cruz-Martínez
-
Trump Plans to Terminate IRS Direct File program
Tax Filing The IRS Direct File program was piloted last year in 12 states and has since expanded to 25. But will it last under the Trump administration?
By Gabriella Cruz-Martínez
-
How Caregivers for Adults Can Save on Taxes in 2025
Tax Breaks Caring for your parent or spouse can be stressful, but the IRS offers tax breaks for qualifying taxpayers. Here they are.
By Kate Schubel
-
U.S. Treasury to Eliminate Paper Checks: What It Means for Tax Refunds, Social Security
Treasury President Trump signed an executive order forcing the federal government to phase out paper check disbursements by the fall.
By Gabriella Cruz-Martínez