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 states any club memberships for pleasure, recreation, or social purpose cannot be deducted; eligibility is determined by the club activities or purposes. 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. For example, if the membership is purchased to entertain or recruit clients, the membership can be counted as a business expense. If you participate in a professional club, as long as it is not on the prohibited list, there are eligible deductions. Remember, if you have already been reimbursed for expenses, they are no longer eligible for tax deduction.
Another element to consider is that, while owning or renting a club doesn’t guarantee deductible expenses, getting education for your business can be counted as a deductible expense. 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 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. That, as well as employee payroll, uniforms, and training costs can be counted toward tax deductions.
Remember, when calculating certain deductions, be very thorough on what charges apply specifically to your business. If you purchase clothes for work, but can be used for other occasions, then they are more likely to be disqualified as a deductible expense. 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.
When it comes to memberships, if they are purchased for leisure, they do not count. However, if the membership expenses are accumulated due to your business, whether entertainment for clients or education for your employees, qualifying items can be written off.
Always remember to avoid items that have been reimbursed or that are personal luxuries because the IRS can audit your tax forms at any time. Also, there are different sections that correlate with certain expenses. While most items can be filed under Schedule A on the 1040 form, if you have an LLC for you organization or club, you can deduct expenses like mileage in Schedule C of the same form. Again, when determining which expenses to deduct, consider if the expenses are both ordinary (typical incurred expenses for that business i.e. golf clubs for golf lessons) and necessary (employee training) for your business. So long as you follow (and respect) the guidelines, you are able to be reimbursed for the money you deserve!