Tips, Christmas gifts for household service employees?

I would consider these tips if reasonable and ordinary for your rental activities.

Any amount over $25 for the whole year paid to an employee or any amount paid to a contractor whose total payments are at least $600 should be reported on the appropriate W-2 or 1099Misc.

Shouldn't any amount be reported on the W2?

For the OP's specific situation, yes. The described "gifts" to the employees are taxable income.

This is a "business gift expense". Note: we are not discussing your own W-2 employees. The IRS has allowed a business to deduct business gift expense up to a maximum of $25 per donee.

You can find an excellent discussion of this subject in the Business Owners Toolkit by Walters Kluwer:

nest" personal residence

The $25 limit (which is set by Congress, not the IRS) is also limited to non-cash items.

ANY cash payment in the described situation is taxable income to the recipient.

"empty nest" personal residence

I can't find anything in Sec. 274 or its regulation that excludes from the definition of a business gift "cash." Note that in the definition of gifts (see below), it refers to items excludable in Sec. 102. Sec. 102 includes cash gifts.

Sec. 274 (b) Gifts (1) Limitation No deduction shall be allowed under section 162 or section 212 for any expense for gifts made directly or indirectly to any individual to the extent that such expense, when added to prior expenses of the taxpayer for gifts made to such individual during the same taxable year, exceeds $25. For purposes of this section, the term ?gift? means any item excludable from gross income of the recipient under section 102 which is not excludable from his gross income under any other provision of this chapter, but such term does not include? (A) an item having a cost to the taxpayer not in excess of $4.00 on which the name of the taxpayer is clearly and permanently imprinted and which is one of a number of identical items distributed generally by the taxpayer, or (B) a sign, display rack, or other promotional material to be used on the business premises of the recipient.