“Is my gym membership fee tax-deductible?” This inquiry pops up more often than one would think. Before giving clients an automatic answer, it may help to brush up on current tax laws that govern the world of fitness and advise clients on gym membership deductions.
Health Maintenance versus Medical Improvement
The majority of fitness center attendees come out of a personal desire to either improve or maintain current states of wellness. There remains no doubt as to the fact that a fit body can ward off many illnesses, which are both incidentally bothersome as well as potentially life-threatening. While very important to successful longevity, the IRS takes a more general approach to health maintenance when it comes to tax exemptions
The current law states that one cannot deduct the cost of the gym membership when annually filing taxes. While acknowledging that staying in relatively good shape at a gym promotes better health, the IRS feels that general toning and fitness workouts do not qualify as deductible expenses.
As with most rules, exceptions do exist, most notably fitness expenses aligned with medical prescription. Certain detailed cases of medical care, defined as “…amounts paid for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting a structure or function of the body”, can sometimes qualify as deductible expenditures.
Qualifying the Function of the Fitness Center
Well-versed in just this sort of legal loophole, savvy accountants keep their eyes open while still strictly adhering to IRS rules. In order for the IRS to accept such gym memberships as medical deductions, they require written verification by a physician of the specific diagnosis of the condition, physical/mental defect, or illness, as well as the recommendation of using gym/fitness/health club facilities as a treatment for the specific ailment.
Documentation, most likely falling on the shoulders of said client’s personal trainer, must accompany the aforementioned paperwork, outlining what specific activities at the gym the client uses in the treatment of the condition. As an example, diagnosis of obesity or hypertension might qualify one’s gym membership as a medical expense, provided one reports the expense as an itemized deduction.
At this point, the deduction gets subject to certain adjusted gross income limitations. If an individual plans to move forward with this deduction, hiring a quality CPA or tax attorney almost guarantees a careful eye to the detail revolving around the adjusted gross income limits, since this often tends to differ depending on the tax year in question. Typically, a deductible medical expense must not exceed 7.5% of one’s adjusted gross income. In addition, having a pre-existing gym membership (before the diagnosis) immediately disqualifies it as a tax-deductible expense.
Gym Cost as a Recruiting Tool
The IRS offers tax benefits to any self-employed taxpayers and sole proprietors of businesses who choose to promote the health and well-being of employees. Used as a powerful recruiting tool, employers may offer to pay for health club or gym memberships. This entitles owners to deduct the costs of such gym fees, as a benefit paid that serves their employees well and helps to reinforce good lifelong health habits.
Where’s the Gym??
In 2007, the Senate introduced the Workforce Health Improvement Program Act to Congress in an effort to amend an IRS code established back in 1986. That code stated that employers could deduct the costs of gym memberships only if they offered fitness equipment on the premises. Passing this new bill proposal would allow employers to deduct the costs of their gym membership expenses for both on-site and off-site facilities. As of 2011, Congress had not passed the bill. As current as research indicates (which may be a few years old at the time of this writing) the IRS allows business owners to deduct only the costs of providing on-site gym facilities. Any reimbursement of off-site gym membership fee to the employee then gets included as part of his regular taxable “income”, requiring him to report this value.
On-site fitness facilities provided by a business owner exist solely for the benefit of employees, their spouses, and dependent children. This includes the following:
- current employees
- retired employees
- a widow or widower of an employee
- employees out on disability
In addition, the on-site fitness center must not permit access/membership to the general public.
Itemizing Equipment for Deductions
In April of 2016, The IRS considered the value of passing the Personal Health Investment Today (PHIT) Act similar in nature to a bill introduced the year before by Representative Jason Smith (R-MO). Bill H. R. 1679 would allow taxpayers who itemize their deductions to include certain sports and fitness expenses as qualified medical deductions.
This would encompass membership at a fitness facility or participation in a program of physical exercise/activity. The allowable sum one can claim in this arena, limited to $500 for individuals and $1000 for married couples, does not automatically include any and all sports. The IRS reserves the right to exclude sports engaged in merely for pleasure and recreation, not serving any medical/rehabilitation function. This would include activities such as bowling, sailing, golfing, rollerblading, and hunting.
The bill successfully passed, by a significant margin, helping individuals whose places of employment offer HSAs (health savings accounts). Currently one can use these accumulated funds to help pay for qualified medical expenses; now, by allowing the deduction of gym memberships undertaken for medicinal purposes, individuals can take advantage of additional tax breaks.
Get the Word Out
In most cases, gyms whose offerings do include activities geared to improve or ameliorate diagnosed illnesses/conditions do not penalize the trainer. The fee remains untouched, even if the client can deduct a portion of the fees on their taxes. Gym owners offering such specific exercise programs would do well to advertise this, not only to the general public but to medical professionals too. Knowing what fitness facilities can offer, including trainers who can safely and knowledgeably work with such patients, makes it easy for doctors who wish to prescribe fitness in their comprehensive health care plan.