You can deduct the cost of tangible gifts you give to employees as long as the value does not exceed $25 per year per employee. They qualify as business expenses, and the gifts are not taxable to the employees or subject to withholding.
Cash — or cash equivalents, such as gift certificates — are looked at differently through the tax authorities’ eyes, however. You must treat such gifts as additional compensation, no matter what the amount. These gifts are subject to withholding and need to be run through payroll.
Per the IRS, “You can deduct no more than $25 for business gifts you give directly or indirectly to each person during your tax year.”