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Tax.appeal.168, Tax Accountant
Category: Tax
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Experience:  3+ decades of varied tax industry exp. Tax Biz owner
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Are gym memberships tax deductible?

Customer Question

As an LLC or a Corporation may I deduct gym membership as a “Wellness Program Expense” or something similar. Supposedly it is now allowed as a legitimate business expense due to Obama’s Health Care Reform Plan.

Are there limitations to who can participate such as only employees, or as a shareholder in an LLC or a stockholder in a Corp?

Submitted: 6 years ago.
Category: Tax
Expert:  Tax.appeal.168 replied 6 years ago.

In brief, the answer is yes, however, certain rules apply. (Please read in its entirety). SEE BELOW:

Employers who offer to subsidize their employees' gym membership expenses can deduct those costs as ordinary and necessary business expenses in the year in which they paid them. However, business owners may have to pay employment taxes on the gym membership payments as fringe or supplemental wage payments.

Workforce Health Improvement Program Act

In 2007, the Senate introduced the Workforce Health Improvement Program Act to Congress. The act sought to amend the Internal Revenue Code of 1986. Under the tax code, employers can take a tax deduction for the costs of their gym memberships if they offer them on-site. If Congress passed the bill, it would have allowed employers to deduct the costs of their gym membership expenses for both on-site and off-site facilities. Congress has not yet passed the bill.

Off-Site Facilities

The IRS typically considers fringe benefits as taxable income if employers provide them off-site. Thus, small business owners who cannot typically subsidize the costs of providing on-site gym memberships do not receive tax benefits for paying for their employees' off-site gym memberships. Furthermore, if they pay for them as a fringe benefit, the IRS requires them to include the monthly expenses as income on each of their employees' W-2 tax forms.