Is a holiday gift from a client taxable?

[MG26]

I'm a pet sitter. Sometimes my clients give me a holiday monetary gift or when they cancel a booking, they'll give me something anyway although I don't have a formal cancellation policy. Is this money considered a tip and taxable even though I didn't work for it?

[AmyC]

An actual gift from a client is not taxable to you. A gift from you to a client is deductible when $25 or less (per client/ per year).

See Frequently asked questions on gift taxes.

[rjs]

Yes, the "gifts" from your clients are taxable income. Since you are self-employed, "tips" are no different from any other payment that you receive from your clients. It's all income that you received in the course of your business. You would not have gotten any of the extra money if you had not cared for the clients' pets. And you did work for the holiday gifts. You just got paid sometime after you did the work.