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Your company would like to do something to encourage its employees to live healthy lifestyles. One suggestion is to provide memberships to local health clubs or gyms. Would your company be able to exclude the value of an employer-provided membership to a commercial health club or gym from its employees’ incomes? |
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Answer: |
No. Tax-free treatment for the use of employer-provided athletic facilities does not extend to employer-provided memberships in commercial health clubs or gyms.
Requirements for tax-free use of athletic facility. The value of the use of an on-premises athletic facility can be excluded from the income and wages of participating employees if all of the following requirements are met:
- the facility is located on the premises of the employer;
- the facility is operated by the employer or by contract with another company, but under the employer's control;
- substantially all the use of the facility is by employees, their spouses and dependent children; and
- the facility is not used for any residential purposes.
The exclusion from gross income of the value of an employer-provided athletic facility does not include any facility if access to it is made available to the general public through the sale of memberships, the rental of the facility, or the like.
Tax effect on employer. An employer may deduct the costs of establishing and operating an on-premises athletic facility as an ordinary and necessary business expense. If the facility is also owned by the employer, its cost may be depreciated by the employer.
Source: CCH Employee Benefits Management |
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