Are Gym Memberships Tax Deductible for Businesses?

Well-intentioned employers sometimes offer gym memberships to employees as a fringe benefit – for good reason. Benefits like this can make it easier to recruit and retain employees and may even lower employer healthcare costs. But are gym memberships tax-deductible?

Employers are often unaware of the tax implications of employer-paid gym memberships, putting them at increased risk of fines and penalties. Employees usually have to count the perk as taxable income, too, which can offset the retention advantages of offering an employer-paid gym membership in the first place. 

Are Gym Memberships Tax-Deductible? 

As a general rule, wellness benefits like employer-paid gym memberships are subject to the same federal tax rules as any other employee rewards or prizes. That is, they are generally not tax-deductible.

Unless a specific tax exemption applies to the incentive, the amount of the incentive is included in an employee’s taxable income and is subject to payroll taxes.  

There is no specific tax exemption for wellness program incentives. The two main federal tax exemptions that apply to wellness incentives are the exclusions for medical care and employee fringe benefits.

Gym memberships qualify as neither. Tax courts routinely consider gym memberships a personal expense for a personal benefit and deny business-related deductions for these benefits.  

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Tax Implications of Employer-Paid Gym Memberships 

• Understanding De Minimis Benefits: The Tax-Free Perks

  The IRS classifies infrequent benefits of minimum value as de minimis. These benefits include things like a company t-shirt, occasional donuts or flowers to celebrate a work anniversary. They are not considered taxable income to employees. 
  

• Why Gym Memberships Don't Qualify as De Minimis Benefits

  An ongoing benefit, however, (like a gym membership) does not qualify as a de minimis benefit. One ruling determined that benefits exceeding $100 in value are never considered de minimis, either. 
  

• Balancing Goodwill with Tax Responsibilities for Gym Memberships

  Employers choosing to offer paid or partially paid gym memberships, are likely to reap employee goodwill benefits for doing so, but they must add the dollar value of such memberships to their employees’ taxable income. 
  

• Taxation on Gym Memberships: A Comprehensive Breakdown

  Employer-paid gym memberships are subject to federal income tax, Social Security tax, Medicare tax and state income tax, so both employers and employees must pay their portions of these taxes. 

The Axcet HR Solutions Advantage 

Leveraging the expertise of Axcet HR Solutions offers unparalleled advantages, particularly when it comes to enhancing the health and wellness of your workforce. As a seasoned professional employer organization (PEO), we excel in extending the purchasing power necessary for small businesses to access top-tier health insurance benefits, akin to those offered by Fortune 500 companies. This commitment extends to potentially lowering gym membership costs for your employees, underscoring our dedication to their overall well-being.

By collaborating with Axcet HR Solutions for your comprehensive HR requirements, your team benefits from exclusive discounts through our extensive gym network. Although managing gym memberships directly isn't within our scope of benefits administration, our solutions are designed to render these memberships more accessible and budget-friendly.

It's crucial to grasp the full extent of IRS regulations and the tax implications of adding new perks to your benefits roster. Understanding the answer to, "Are gym memberships tax deductible?" is essential for maintaining compliance and optimizing your benefits strategy.

Schedule a consultation with Axcet HR Solutions today. Discover how a partnership with a proficient PEO can simplify your HR processes, including payroll services, allowing you to concentrate on driving your business forward.