You don't pay income tax on a gift card you receive, but you do pay tax on any money you earn by selling it

A gift card given to you as a gift is not taxable income. The person who gave it to you may have gift tax consequences on their end (depending on the amount and their relationship to you), but you owe nothing to the IRS just for receiving it. You can use the card to buy things without reporting it on your tax return.

The tax situation changes if you sell the gift card for cash or trade it for money. If you sell a $50 gift card to a resale site or another person and receive $40, that $40 is taxable income to you. The same applies if you use a gift card exchange service or sell it online through a marketplace.

The tax also applies to the items you buy with the card only if those items would normally be tax-deductible. For example, if you use a gift card to buy office supplies for a business you run, those supplies may be deductible. If you use it to buy groceries for yourself, there is no deduction.

Key Takeaways

  • Receiving a gift card as a gift creates no tax obligation for you, even if it is for a large amount.
  • Selling or trading a gift card for cash or cash value is taxable income and must be reported.
  • Using a gift card to buy something is not taxable, but the item itself may be deductible if it qualifies as a business expense.
  • The person who gave you the gift card may have gift tax filing requirements, but that does not affect your taxes.

When you sell a gift card, what counts as income

If you sell a gift card, the amount you receive is income. This includes sales through gift card resale websites like CardCash, Raise, or Decluttr, sales to friends or family, or trades through marketplace apps. The IRS treats the cash you receive as taxable income in the year you receive it.

You report this income on your tax return. If you sell gift cards occasionally, the income goes on Schedule 1 (Form 1040) as other income. If you sell them regularly as a business, you would report it as self-employment income on Schedule C and pay self-employment tax as well.

Keep records of what you sold and what you received. If a resale site sends you a 1099-K or 1099-MISC (which happens when you receive over a certain threshold, usually $20,000 in a year), the IRS will have a copy too, and your return must match.

Gift cards you use to buy things versus gift cards you sell

Using a gift card to purchase something is different from selling it. When you buy a coffee, a shirt, or a book with a gift card, that purchase itself is not a taxable event. You do not report it to the IRS. The store does not send you a tax form.

However, if the item you buy would normally be tax-deductible, you can deduct it the same way you would if you paid cash. For example, if you use a gift card to buy a work laptop for your freelance business, that laptop is a deductible business expense. If you use it to buy a personal item, there is no deduction.

The distinction matters because it determines what you report. Selling the card = income. Using the card = no tax event, unless the purchase itself qualifies for a deduction.

How the gift tax works for the person who gave you the card

The person who gave you the gift card may have gift tax consequences, but you do not. The IRS allows each person to give up to a certain amount per year to each recipient without filing a gift tax return. This amount changes yearly — it was $18,000 per person in 2024 and $19,000 in 2025.

If someone gives you a gift card for less than that amount in a single year, they owe no gift tax and file no return. If they give you multiple gift cards or other gifts that total more than the annual limit, they must file Form 709 (the gift tax return) but still may owe no tax — they straightforward use part of their lifetime exemption.

This is their responsibility, not yours. You do not need to report the gift or track it. You only need to know that receiving the gift card creates no tax bill for you.

Reporting gift card income on your tax return

If you sold gift cards and received cash, you report that income. Where you report it depends on how often you sell and whether you treat it as a business.

For occasional sales, report the income on Schedule 1 (Form 1040), line 8 (other income). Include the total amount you received from all sales in that tax year. If you received a 1099-K or 1099-MISC from the resale site, attach a copy to your return and make sure the amount matches.

If you sell gift cards regularly and treat it as a business, you report the income on Schedule C (Profit or Loss from Business) and pay self-employment tax on Schedule SE. This applies if you buy gift cards at a discount and resell them, or if you sell them as part of a larger resale business.

What records to keep if you sell gift cards

Keep records of every gift card you sell: the original value, the amount you received, the date of the sale, and the name of the buyer or resale platform. If you use a resale website, read your transaction history and keep it with your tax records for at least three years.

If you received a 1099-K or 1099-MISC, keep that form with your return. If the form shows an amount different from what you actually received (for example, if the platform took a fee), you may need to adjust the income on your return or attach a statement explaining the difference.

If you buy gift cards at a discount and resell them as a business, keep records of your purchases too. You can deduct the cost of the cards you bought, so your net income is the selling price minus what you paid for them.

Gift cards from employers and whether they are taxable

A gift card from your employer is usually taxable income. The IRS treats most employer gifts as wages, and your employer should include the value on your W-2 in box 1 (wages). This is true even if the card is called a "gift" or a "bonus."

There is a narrow exception: if your employer gives you a gift card as a holiday gift and it is part of a tradition of small gifts to all employees (not based on performance), and the total value is small, it may not be taxable. But most employer gift cards are taxable, and you should see them reported on your W-2.

If you receive an employer gift card and it does not appear on your W-2, ask your employer's payroll or HR department. The value should be included in your wages so that the correct tax is withheld.

Frequently Asked Questions

Do I have to report a gift card I received as a personal gift?

No. A gift card you receive from a friend, family member, or anyone else as a gift is not taxable income to you. You do not report it on your tax return. The giver may have gift tax filing requirements depending on the amount, but that does not affect your taxes.

What if I sell a gift card for less than its face value?

You report the amount you actually received as income, not the original value of the card. If you sell a $100 gift card for $75, you report $75 as income. You do not get to deduct the $25 loss on your personal tax return (though you could if you were in the business of reselling gift cards).

Do I need to report gift cards I use to buy things?

No, using a gift card to make a purchase is not a taxable event. You do not report it to the IRS. The only exception is if the item you buy is tax-deductible (like a business expense), in which case you deduct the item itself, not the gift card.

Will I get a tax form if I sell gift cards online?

You may. If you sell gift cards through a resale platform and your total sales reach a certain threshold (usually $20,000 in a year), the platform may send you a 1099-K or 1099-MISC. The IRS receives a copy, so you must report the income on your return.

Is a gift card from my job taxable?

Yes, in most cases. An employer gift card is treated as wages and should appear on your W-2. If it does not, contact your payroll department. The value is taxable income and should be included in the wages your employer reports to the IRS.