Is My Gym Membership Tax-Deductible?

Posted: 08.12.09

I got this article from a good friend of mine who is a bean counter. Thanks to him for the article and what I learned from it.

If you want to learn how your gym membership may benefit you tax wise this article should help you.

Rob

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Is My Gym Membership Tax-deductible?

Each year, I get clients who want to claim their gym or fitness club membership as a medical expense. In their view, the gym is preventive medicine improving their overall health. While this may be true, Canada Revenue Agency (CRA) does not accept this argument. Typically, allowable medical expense under our current regulations will be reactive in nature rather than proactive or preventative. There are exceptions, but CRA usually only permits deductions for treatment of an existing ailment, injury, or disease. The list of treatments and items that are allowed is far too long to go into here. If you have questions about a specific item or treatment, you should contact an accountant or your local CRA office (they can be reached at 1 800 959-8281).

There is a Way

There are some individuals for whom we can reduce the cash outlay. If you are lucky enough to have an employer who is willing to pay for your gym membership as a ‘bonus’ to you, they can certainly do so, and this will be tax-deductible to your employer. For the employee, the gym membership will show up as a taxable benefit on the T4 at the end of the year. The employee will then pay income tax on this amount. The actual amount will vary depending upon each person’s tax rate. For people in Newfoundland, the tax hit can be as large as 44.50% of the cost of the membership.

For a lucky few, though, there is no taxable benefit. The condition upon this is fairly strict and slightly fuzzy (as are many areas of the Income Tax Act). In a Technical Interpretation (IT-211R) issued October 17, 2003, the Canada Revenue Agency permitted employers to pay the membership on the employee’s behalf without issuing a taxable benefit to the employee provided that it is clearly to the employer’s advantage for the employee to be a member of the club. Note that this is not restricted to gym memberships, but may also be applied to other clubs and associations.

Paragraph 2 of the IT states that “membership fees…will be allowable deductions from income if they can reasonably be shown to relate to the earning of income from the business or property.” It would appear from this wording that there is no taxable benefit to the employee if the employer is the primary beneficiary of the advantage of the employee’s attendance at the gym or health club.

While much of the discussion so far has centered around gym memberships, the general principles can be applied to other memberships in clubs and societies, as well. If your employer is footing the bill, the question to ask is: “Does my membership in this society benefit my employer (through networking) more than it benefits me?” If the answer is yes, then it would appear that the employer can foot the bill without passing along a taxable benefit to the employee. Of course, if you are self-employed, it means that you can claim the membership as a business expense rather than paying for it using after tax dollars.

Note: Canada Revenue Agency specifically excludes golf club memberships from this category.

Disclaimer: The information above is general in nature, and may not be applicable to every situation. If you think you may qualify, consult an accountant to discuss the details specific to your situation.

Rodney Payne, CGA

For Tax Services E-mail

RodPayneCGA @ gmail.com

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