Deducting Awards Given to Employees

Qualified Plan Awards

A qualified plan award for length of service or safety achievement includes:

  • An established written plan or program
  • It does not discriminate in favor of highly compensated employees
  • The average annual cost of all awards under the plan to all employees must not exceed $400 (excluding awards of nominal value).

Deduction Limit for Qualified Plan Awards

You may deduct up to $1,600 for all qualified plan awards (length of time and safety) given to the same employee during the year.

The overall $1,600 applies if the same employee receives some qualified plans awards and some non-qualified plan awards.

Non-Qualified Plan Awards

The maximum annual deduction for non-qualified plans awards for each employee is $400.

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