If so.........walk really carefully with the "gift certificates", etc.

Lots of penalties.........on you and him.............if you don't handle things correctly.

If you choose to not take a deduction............you still run the risk of the penalties, since he provided you with third party labor, and the income was earned by him, and defined as taxable to him.  However---------obviously-----------so called "gifts" would be not as obvious to the casual reviewer of tax records.

He runs the risk of not reporting income-------no matter how you handle it.

Unless he is in the first year of retirement for social security, and bumping the limit, I don't see how his retirement would be "screwed up" by reporting the earned income.  Lots of myths out there.......maybe that is one of them...........or maybe he is just saying that so that you don't feel like you have to pay him.

Walk carefully...............some would not deem your benevolence to be appropriate.....especially those looking for tax money to cover DC's expenditures.