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Gift Card Tax Implications

  • 1.  Gift Card Tax Implications

    Posted 08-11-2021 07:32 AM
    ​​Someone has mentioned that if Gift Cards are given to scholarship recipients for use on  if used for tuition, books or school equipment then the gift card is tax free.  Is that accurate?

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    Alayna Brinkley
    Director, Gift Services
    Boston Children's Hospital Trust
    alayna.brinkley@chtrust.org
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  • 2.  RE: Gift Card Tax Implications

    Posted 08-11-2021 07:46 AM
    Never if given by donors to specific students (IRS Publication 526).

    But if part of a scholarship program, it is possible depending on the actual purpose.  You will need to review IRS Publication 970 to determine what uses beyond tuition are permissible.

    John

    John H. Taylor 
    919.816.5903 (Cell/Text)

    Big Ideas; Small Keyboard





  • 3.  RE: Gift Card Tax Implications

    Posted 08-11-2021 08:41 AM

    So, just to clarify, there are two separated events related to Gift Cards given to scholarship recipients for use on tuition, books or school equipment.

     

    • If the gift cards are contributed by a donor, there is the question of whether the donation qualifies as a charitable deduction.
    • When the gift cards are given to students, there is the question of whether the value of the gift card represents taxable income to the student (or whether it require an adjustment of other aid that the student might be receiving).

     

    John addressed the first of these points, which is subject to the usual considerations of donor control (esp. with respect to selecting recipients), whether the contribution primarily benefits the charitable mission of the organization or primarily benefits the individual, etc.  Since its unlikely that the donor is providing the education, books, equipment, etc., the issue about whether the gift cards represent services or a partial interest doesn't arise (unless, I suppose, the donor was a textbook supplier or something?).

     

    The question about whether the distribution of the gift cards represents taxable income to the student or might affect their financial aid is probably a question for experts in financial aid.

     

    My US$0.02 worth; the usual disclaimers apply.

     

    Good luck!

     

    Alan

     

    Alan S. Hejnal   

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