Offering gym memberships as an employee perk seems like a win-win. It supports your team’s well-being, may reduce healthcare costs, and helps position your company as a great place to work. But when it comes to tax deductions, the question employers often ask is: Are gym memberships tax deductible?
In this post, we’ll break down what employers need to know about tax rules surrounding gym membership benefits, including what the IRS allows, what counts as a taxable benefit and how to avoid compliance pitfalls.
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In most cases, no—gym memberships are not tax-deductible when provided to employees as a benefit. The IRS generally treats employer-paid gym memberships as a personal expense rather than a business-related deduction.
Unless a gym membership qualifies under a specific exclusion—such as medical care or certain fringe benefits—it is considered a taxable benefit. Unfortunately, gym memberships usually do not meet those criteria.
Tax courts consistently rule that gym memberships provide a personal benefit, even when offered through a wellness program or used to encourage workplace health.
That means employers who offer gym memberships must include the value in the employee’s taxable income—and it’s subject to payroll taxes just like wages.
The IRS permits tax-free treatment of certain wellness benefits only if they qualify as medical care—but gym memberships don’t fall into that category.
Even if a doctor recommends exercise, the membership itself is still considered a personal expense.
Some employers hope gym memberships might qualify as de minimis (minimal) fringe benefits. These are small, infrequent perks—like a birthday cupcake or company-branded swag—that aren’t taxed.
But gym memberships don’t meet that standard. They’re ongoing, carry a relatively high value, and are used regularly, which excludes them from de minimis treatment.
💡 Did You Know? The IRS has stated that benefits exceeding $100 in value can never be considered de minimis.
Yes. Employees must pay taxes on employer-paid gym memberships unless a specific tax exemption applies—which, again, is rare.
Employers are required to:
Include the value of the membership in the employee’s W-2 wages
Withhold appropriate federal income, Social Security and Medicare taxes
Remit the employer share of payroll taxes on that amount
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There’s no doubt that wellness benefits, including gym memberships, can improve morale and support employee retention. But compliance is key.
If your business offers paid or subsidized gym memberships, be sure to:
Treat the benefit as taxable income
Report it properly through payroll
Communicate clearly with employees about the tax impact
You may be wondering: Is a gym membership tax-deductible under any scenario? In very rare cases—such as on-site fitness facilities used exclusively by employees—a limited deduction may apply. However, this is highly specific and should be reviewed with a tax advisor.
For most employers, gym memberships offered through external providers are not deductible as a business expense, nor are they exempt from employee income tax.
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Gym memberships typically do not qualify for tax deductions under IRS rules.
The value of employer-paid memberships must be included in employees’ taxable income.
De minimis exclusions don’t apply due to value and frequency.
Employers and employees are both responsible for paying applicable taxes on the benefit.
Axcet HR Solutions makes it easier for small businesses to build better benefit programs while staying compliant with IRS rules. As a certified professional employer organization (PEO) with decades of HR and payroll expertise, we offer:
Fortune 500-level health insurance at affordable rates
Guidance on the tax implications of wellness benefits
Access to exclusive discounts through our national gym network
We don’t manage gym memberships directly, but our solutions can make wellness perks more affordable and easier to administer—without risking IRS penalties.
Get expert guidance from Axcet HR Solutions. Our team helps small businesses navigate payroll, HR compliance and employee benefits with confidence.
Schedule a consultation and see how a certified PEO can support your wellness goals while keeping your tax obligations in check.
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