Dues for Clubs and Organizations
The IRS is strict about deducting dues for most kinds of clubs. The purpose and activities of the club, not the name, is the determining factor in whether you can deduct club dues.
Club Dues You May Not Deduct
You cannot deduct does for these types of clubs:
- Entertainment activities or facilities
- Recreation or sport, including golf clubs, country clubs, health and fitness clubs
- Airline or hotel clubs (like the airline clubs at airports)
- Any club with a social purpose
You also can't deduct the cost of a country club, for example, arguing that it would be "conducive to business discussions."
Club Dues You May Deduct
You may deduct costs for dues to professional organizations and those organizations which you can show are necessary to conduct your business. For example, your dues to the Chamber of Commerce are deductible if you can show that your Chamber membership allows you to promote your business.
You may deduct dues you pay to:
- Boards of trade
- Business leagues
- Chambers of commerce
- Civic or public service organizations, like Kiwanis or Rotary
- Professional organizations such as bar associations and medical associations
- Real estate boards
- Trade associations
- Personal or hobby clubs
The difference between these club dues, which are deductible, and dues to non-deductible clubs is the purpose. The non-deductible clubs have purposes which are primarily entertainment, and the IRS says that entertainment is not a business purpose.
Club Dues as Compensation
Some businesses pay club dues for executives. But you can't have it both ways. If you pay club dues for an employee, this is considered compensation, even though you cannot deduct it as a business expense. You must report this compensation to the IRS and the employee must pay income tax on this compensation.
Club Expenses as Entertainment
Even though you can't deduct the cost of a club as a business expense, you can deduct the cost of a meal or entertainment at a club as a business expense. For example, if you have a business luncheon for clients at a country club, you can't deduct the cost of club dues, but you can deduct the cost of the meal. The purpose of the event must be for business purposes, and you should be able to prove that purpose. The event should also not be "lavish or extravagant."
Don't forget that meals and entertainment expenses are subject to a 50% limitation.
Where to Show Deductible Club Expenses
For deductible club dues, you may include these deductions on your business tax form, depending on your business type:
- For sole proprietors and single-member LLCs, show these expenses in the "Expenses" section of Schedule C
- For partnerships and multiple-member LLCs, show these expenses in the "Deductions" section of Form 1065
- For corporations, show these expenses in the "Deductions" section of Form 1120.
Disclaimer: This article is intended to be general in nature and is not intended to be tax or legal advice. If you want to deduct club dues on your business tax return, check first with your tax professional.