The IRS is strict about deducting dues for most kinds of clubs on business tax returns. Your business can only deduct dues and expenses on your business tax return for clubs whose purpose is business-related. The purpose and activities of the club, not the name, is the determining factor in whether you can deduct club dues.
Membership Dues You Can–And Can't–Deduct
Here's a general list of membership dues you can and cannot deduct. This list is the same for all business types, including corporations:
You can deduct membership dues for:
- Your local chamber of commerce
- A trade association, like an association of manufacturers of a specific group of products
- A civic or public service organization
- Professional organizations, like a state bar association or chiropractic board
- A real estate board
You can also deduct dues to public service organizations like the Rotary or Lions clubs as long as their main purpose is to help communities and not to provide members with social activities or entertainment.
You cannot deduct membership dues (even if you do business there) for:
- A country club
- A leisure or recreation club
- Athletic club
- A sporting club
- A hotel club or airline club
- A dining club (even if you meet there to discuss business)
- Or any club with a social purpose
Other Limits on Deducting Club Expenses
Even if the club purpose is business-related, there are still some limits on deducting expenses:
You can't deduct any entertainment expenses. The new tax law (effective 2018) eliminated any business deductions for entertainment.
You can deduct meal expenses at a social club, but only 50% of the cost and you must be able to show a business purpose (meeting with a client, for example). The event should also not be "lavish or extravagant."
If you host an entertainment event where you pay for food and beverages, you can deduct 50% of the amount of the meal. Make sure the cost of the meal is listed separately.
For example. if you belong to a professional organization you can deduct the membership dues. But if the organization has a golf outing, that's social/entertainment, and you can't deduct the cost of the outing. If there is a cost for an awards dinner at the club, you can only deduct 50% of the cost of the meal.
Employee Deductions for Club Dues
Employees can't claim a deduction for club expenses if your company doesn't reimburse them. This change is effective with the 2018 tax year, through 2025. This expense used to be deductible as a Miscellaneous Expense on Schedule A.
Club Dues as Compensation
Some businesses pay club dues for some employees. But 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.
If your business is a corporation, you may be able to deduct entertainment, amusement or recreation expenses if you paid employees or independent contractors for these expenses. You must include these expenses on the employee's W-2 form or the independent contractor's 1099-NEC form. The employee can't be an officer, director, beneficial owner, or other specified individuals.
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 "Other 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.