Discussion:Health club as an employee benefit
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Discussion Forum Index --> Tax Questions --> Health club as an employee benefit
DR BRISKET (talk|edits) said: | 22 May 2006 |
| Can a business take a tax deduction if it pays the monthly membership on behalf of its employees to a health club or other similiar activity (YMCA fees, etc)? A client asked me this question, and her argument to claim the deduction is that if her employees would be more productive if they were in better shape. | |
| 22 May 2006 | |
| Health club dues paid for employees are not deductible. In fact, I believe that they are a taxable fringe benefit. However, employers are allowed a deduction for on-site exercise facilities provided by employers. | |
Mtmckeecpa (talk|edits) said: | 22 May 2006 |
| Dr,
If you subscribe or can get yours hands on PPC's Comp and Benefits module section 906 deals with this topic. I agree with Warren, no deduction, no matter what the client says the benefit would be...however, PPC says the following which may save some tax along the way.. 906.6 Employer Payment of Nondeductible Club Dues. The employee’s tax treatment when the employer pays for nondeductible club dues depends on whether the employee can substantiate a business connection for the nondeductible club dues and whether the employer treats the business-use portion of the expenses as compensation. 906.7 If employees can substantiate a business connection for nondeductible club dues that are paid directly by the employer, such amounts may be excluded from the employee’s income as a working condition fringe as long as the employer does not deduct such amounts as compensation. For club dues, a business connection exists only if the employee proves the club was used primarily to further the company’s business. 906.8 If the business purpose is substantiated, the employer’s payment is treated as a “business expense” for working condition fringe purposes even though the company gets no deduction [Reg. 1.132-5(s)]. A tax benefit results from the fact the employer can pay the expense without any wage income being reported to the employee. The employer gets no deduction for the amount so treated, but also does not have to pay its half of the FICA tax (and FUTA tax, if applicable) as it would if the amount were treated as compensation. 906.9 Observation: At the employee level, there is no income tax on the amount, and the employee also does not pay his half of the FICA tax. If the employer is a closely held C corporation, this can be a relatively favorable way to get cash out of the corporation and to the owners. 906.10 If the business purpose is not substantiated, any amount paid by an employer for club dues is treated as a compensable fringe benefit. This means that FIT and FICA withholding is required, the employer gets a compensation deduction (within the limits of IRC Sec. 162), and the employee has taxable compensation income. | |
| 22 May 2006 | |
| For those that are interested, I actually lobby on a bill that would expand the fringe benefit deduction to both on-site and off-site non-discriminatory exercise facilities. It is called the "WHIP Act" (HR 1634/S 772).
If you're interested, call up your Congressman and two Senators, and ask them to become a cosponsor. | |
