Don't Count on Club Dues as a Business Expense!

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Don't Count on Club Dues as a Business Expense!

Deductible business expenses generally do not include 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, sporting clubs, athletic clubs, and even airline and hotel clubs.

However, just because the dues are not deductible, it does not mean you cannot 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 would be a deductible business expense.

The club dues disallowance rule generally does not apply to dues paid to professional organizations, including trade, bar, and medical associations. It also does not apply to 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 are not affected by the rule either. However, an organization isn't exempt from the disallowance rule if its principal purpose is to provide entertainment facilities for its members, or to conduct entertainment activities for them.

CAUTION: Even if an organization is exempt from the club dues disallowance rule, the dues that are paid are not automatically deductible. No deduction is allowed unless you can show that the amount paid is an ordinary and necessary business expense. If you have questions regarding club dues, please give our office a call.