Tax Deductions and Your Business Gym

Corporate Fitness programs have been around for over a quarter of a century.  It increases employee morale, , productivity and decreases absenteeism.  

If you are thinking about implementing an business fitness center (gym or athletic center) for recruitment and retention purposes, then you will be ecstatic to know you will may also qualify for a tax deduction.  However there are rules you must follow in order to qualify for this tax deduction.

To be deductible the primary users of the facility must be your employees, they must be the primary benefit of the facility.  For the purpose of this deduction an employee is not considered officers, shareholder, or anyone with 10% or greater ownership in the business as well as highly compensated officers.

There is a ten percent ownership test to assist with identifying who specifically is excluded.  The law treats employee as owning any interest owned by a member of his or her family.  Yes people your family members may be considered owners for the purpose of this tax deduction.  Family includes brothers and sisters, spouses, lineal ancestors and lineal descendants.

Also, highly compensated employees are any employee who earns over $120,000 for the preceding year.  Thus the fitness facility/fitness center must benefit rank  and file employees (the ordinary employees of the business excluding leadership), more than leadership (owners and highly compensated employees).

In other words, the rank and file employees must use the facility more days than the leadership. 51-49 Primary benefit test.

Example: Rand and file employees use the gym 252 days during the year and leadership uses the  gym for 130 days the gym passed the 51-49 test; therefore, it is deductible as an employee recreational facility.

Contact Us!