Vrakas CPAs, Here Are Your Articles for Wednesday, November 08, 2017
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Club Dues: Deductible Or Not Deductible

 

The IRS distinguishes between dues paid to clubs, which often are not deductible, and dues paid to professional organizations, which are often deductible. 

Generally, you cannot deduct dues paid to social, athletic, sporting, airline, hotel, and luncheon clubs. The IRS generally views these organizations as providers of entertainment for their members. However, other business expenses paid at a club, such as meals, may be deducted to the extent they satisfy the other requirements for a business deduction. For example, if you take your client to your club for lunch during which a substantial and bona fide business discussion takes place you may deduct 50 percent of the cost of the lunch just as you would for a business meal in any restaurant. In other words, in order to be deductible, club dues must escape the disallowance rule and also be an ordinary and necessary business expense. 

The following are not considered clubs for purposes of the disallowance rule: 

  • Business leagues
  • Trade associations
  • Chambers of commerce
  • Boards of trade
  • Real estate boards
  • Professional organizations (such as bar associations and medical associations)
  • Civic or public service organizations (such as Kiwanis, Lions, Rotary, Civitan and similar organizations).

Dues paid to these professional associations, trade associations, and public service groups may be deductible if you paid the dues for a business purpose, and the organization's principal purpose is not to provide entertainment for members or their guests or to provide those parties with access to entertainment facilities. 

Finally, for tax consequences, a club's activities, not its name nor your reason for joining, control whether the IRS determines if it exists to entertain its members or if it has a business or social service purpose. 

 
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Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. Tax articles in this e-newsletter are not intended to be used, and cannot be used by any taxpayer, for the purpose of avoiding accuracy-related penalties that may be imposed on the taxpayer. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
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