In short, personal club dues are never deductible because they are truly considered a personal expense that are incurred by the taxpayer. However, a business may pay club dues to one or several types of organizations. These dues may or may not be deductible, depending on the type of organization and its purpose.
When can you deduct club dues?
The general rule is that businesses generally cannot deduct dues paid to a club organized for business, pleasure, recreation or other social purposes. This disallowance rule takes in country clubs, golf clubs, business luncheon clubs, athletic clubs, spa clubs, and even airline and hotel clubs that employees or owners may wish to join.
Deducting Club Dues
However, there are some exceptions to the general rule that club dues are non-deductible personal expenses. The exception to this rule is that a business can deduct 50% of the cost of otherwise allowable business entertainment at a club, even if the dues you pay to the club are nondeductible. For example, if you have dinner with a client at a dinner after a substantial and bona fide business discussion, 50% of the cost of the dinner is deductible as a business expense. Taxpayers will need to keep very accurate records to support these deductions upon an IRS audit.
What Club Dues can you deduct?
The club-dues disallowance rule generally doesn’t affect dues paid to professional organizations such as bar associations and medical associations, or civic, or public-service-type organizations. The dues paid to local business leagues, chambers of commerce and boards of trade also are not affected by the limitation on the deduction of club fees. Of course professional organizations specific to your business are deductible. These include bar associations, chambers of commerce and other trade associations. Civic or public-service-type organizations, such as the Lions, Kiwanis or Rotary clubs may also be deducted. Again, you cannot deduct dues associated with an organization whose principal purpose is to provide entertainment facilities to its members, or to conduct entertainment activities for them.
Organizations Exempt from Disallowance Rule
However, an organization isn’t exempt from the disallowance rule if its principal purpose is to provide entertainment facilities to its members, or to conduct entertainment activities for them. Finally, even if the general club-dues disallowance rule do not apply, there is no deduction for dues unless you can show that the amount you pay is an ordinary and necessary business expense.