As a business owner, it's important to stay healthy and fit so you can show up at your best. This can be tough when you're always on the go and juggling a lot, but thankfully, there are gym memberships that offer great discounts for business owners. However, how do you know if your gym membership is tax deductible?
The answer really depends on the type of business entity you have and what your gym membership entails.
For an LLC, gym memberships are typically not considered a business expense and therefore, cannot be deducted. The only exception would be if you could argue a true business purpose to the membership in a more extreme and specific case. For example, say a fitness professional is required to maintain a membership in order to train clients there and there are no other affordable spots in the area. This is a bit of an unfair pressure-driven practice, but a possibility nonetheless. It really comes down to a strong argument as to why this membership is ordinary and necessary to operate your business. For the vast majority, this is a no-go.
For an S Corp or C Corp, gym memberships may be able to be deducted as a business expense if you have an accountable plan in place. An accountable plan is a reimbursement arrangement between an employer and employee that meets certain criteria set forth by the IRS. Again, there must be a strong business case present as to why the membership is an ordinary and necessary cost for your business.
As a business owner, you can pay for the gym memberships of your employees, including yourself, but these costs will be added to their income on their W-2 as they are considered fringe benefits. This means they will need to pay taxes on the income. You would be able to claim the expense from the business, but the employee would claim income. If you are the employee in this case, then you are likely better off skipping this so that income is still in the business and applies toward your QBI deduction.
Now let's talk about another possibility. if you were diagnosed with clinical obesity, hypertension, or another medical condition, that gym membership may be deductible as a medical expense. This would apply if your doctor is prescribing a gym membership for a treatment. Be careful, though, because you cannot have been a member before the diagnosis or else it cannot be tied to the medical need.
In the event the gym membership can be claimed as a medical expense, the expenses are reported as itemized deductions on your personal tax return. As medical expenses, the deduction will be subject to certain adjusted gross income limitations that can vary depending on the applicable tax year.
It's always best to talk to your accountant or tax advisor to see if your gym membership can be considered tax deductible. They will be able to give you the most accurate answer based on your specific situation.