With the warmer weather and longer days of summer here, many business owners turn to golf and other outdoor activities for their business networking and development activities. A question I am often asked by my clients is whether they can deduct the dues for clubs at which they entertain customers or that otherwise may be relevant to their business.
Dues may or may not be deductible; depending upon the type of club and its purpose.
A business generally can’t deduct dues paid to a club organized for business, pleasure, recreation or other social purposes. This disallowance rule would apply to country clubs, golf clubs, business luncheon clubs, athletic clubs, and even airline and hotel clubs.
What about the cost of business meals held at the club with your customers?
Just because the dues are not deductible you can still deduct 50% of the cost of otherwise allowable business entertainment at a club. For example, if you have dinner with a client at your country club after a substantial and bona fide business discussion, 50% of the cost of the dinner is deductible as a business expense.
The club-dues disallowance rule generally doesn’t affect dues paid to professional organizations including bar associations and medical associations, or civic or public-service-type organizations, such as the Lions, Kiwanis, or Rotary clubs. The dues paid to local business leagues, chambers of commerce and boards of trade also aren’t considered “nondeductible club dues.”
If the principal purpose of the club is to provide entertainment facilities to its members or to conduct entertainment activities for them, most likely no tax deduction for the dues will be allowed.
Finally, keep in mind that even if the general club-dues disallowance rule doesn’t apply, there’s no deduction for dues unless you can show that the amount you pay is an ordinary and necessary business expense.