Understanding which of your expenses are eligible for deduction is obviously important when filing taxes. In general, country clubs (and other social club memberships) are not deductible, however that’s not true of all elements that make up a membership.
Publication 463 clearly states that any club memberships for pleasure or recreation cannot be deducted. Business-related incurred expenses qualify, including meals and entertainment. Professional organizations that apply to your business also qualify. When considering which items qualify, also reference the “ordinary and necessary” policy.
If you purchased a membership to entertain clients, then it can be deducted as a business expense.
You can also deduct a club if it’s used to recruit clients. If you participate in a professional club, as long as it is not on the prohibited list, there are eligible deductions. Any expenses that have been reimbursed are no longer eligible for a deduction.
While owning or renting a club doesn’t guarantee deductible expenses, getting an educational conference for your business can be deducted. This can even include travel expenses if you’re going to a conference and bringing employees to learn something. This is especially easy to deduct if you can prove they are gaining the knowledge necessary for your business operations.
While expenses incurred typically apply to national trips (for conferences or job training), a cruise — necessary for work education — qualifies, as long as the ship docks in U.S. ports. This isn’t a catchall, but you can deduct up to $2,000 dollars in travel expenses. Of course, this excludes family members, unless they are a part of your business, as well as personal vacation expenses. For example, if you are attending a conference two days and sightseeing for one day, only the first two days worth of costs apply.
Another deductible expense for business owners is if you have to purchase equipment necessary for the business. If your country club, for example, offers golfing, you need equipment, which comes out of your business expenses. Employee payroll, uniforms, and training-related costs are also tax deductions.
Specificity matters with deductions for business
Remember, when calculating certain deductions, be very thorough on what charges apply specifically to your business. If you purchase clothes for work that can double as recreation wear, then they’re more likely to be disqualified. In fact, that’s a good rule of thumb, if it does not apply solely to your business, then it’s much more likely to be disqualified. For example, if you’re a historical reenactor, then any period-appropriate clothing is likely deductible.
If you purchase a membership for leisure, then it does not count as a deductible expense. If you accrue membership expenses due to your business, then qualifying items can be written off.
Do not include items that have been reimbursed or would be considered personal luxuries. The IRS can audit your tax forms at any time. Also, there are different sections that correlate with certain expenses.
You can file most items under Schedule A on the 1040 form. If you have an LLC for your organization or club, you can deduct expenses like mileage in Schedule C of the same form. When determining which expenses to deduct, consider expenses that are both ordinary and necessary. For example, golf clubs are an ordinary expense for a country club. However, team trainings are more likely to be necessary expenses.
So long as you follow (and respect) the guidelines, you are able to be reimbursed for the money you deserve!
Frequently Asked Questions
What expenses at a country club can be deductible?
Only expenses directly related to your business. For example, a business lunch with a client or dinner with a colleague can be deducted. Similarly, if you host a business event or team training at the club, then that too can be deductible.
Can I deduct membership fees for a country club?
Membership fees for a country club are generally not deductible. The IRS considers membership fees a capital expense rather than a business one. However, if you demonstrate that the membership is directly tied to your business or essential to conduct of your business, then it may be deductible — again, documentation and specificity are essential here.
How do I prove that a country club expense is directly related to my business?
Keep accurate and detailed records especially as to the purpose of the expense, include the date and time as well as the names and business relationships of the people who attended, not to mention the business topics discussed. Of course, keep the receipts and any other supporting documents that show the amount and nature of the expense.
What is the IRS rule for deducting country club expenses?
In general, the IRS rule for deducting country club expenses is that they must be necessary (and typical) expenses incurred in your line of work. This means the expenses must be common and appropriate for your business.