Your company probably offers an array of fringe benefits to its employees, including health insurance and group-term life insurance. While there are certain requirements, these fringe benefits are generally deductible by the company and tax-free to the employees as long as they are not discriminatory in nature. (If your company decides to reward a select group, such as limiting benefits to only the corporate officers, the benefits are generally taxable to the recipients.)
However, there’s one key exception. Suppose you’re a fitness devotee who works out on a regular basis. You can have the company set up a gym at the office for all employees, or maybe just for the exclusive use of the top brass. There are no tax repercussions because the usual nondiscrimination rules do not apply to an athletic facility located on an employer’s premises.
For this purpose, an “athletic facility” includes a gymnasium, swimming pool, tennis court or golf course. Note that the athletic facility must generally be located on premises the employer owns or leases.
The tax exclusion does not extend to employer-paid country club or health-club memberships that are off-site. In other words, the payment of club dues to an outside facility or health club is a taxable fringe benefit.
Bonus: To sweeten this tax perk even further, you can also allow spouses and dependent children to use the facilities.
Can your company deduct the cost of setting up and operating the fitness facility? Yes, but in order to take the write-offs, it must be made available to employees who are not owners or members of the highly-compensated top echelon of the firm.
Tax distinction: The use of the onsite athletic facility is tax free as a “de minimis” fringe benefit even if it is only allowed for certain staff members. But if your company wants to deduct the costs involved, the facility cannot only be offered to highly paid executives.
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