From bar associations to chambers of commerce, there are countless professional organizations that entrepreneurs seek membership in for support and assistance in carrying out business activities. While vital to a business owner’s professional development, these memberships often come with costs in the form of dues to the respective organizations. This raises the question “Are business association membership dues deductible?” Learn about deducting business membership dues to offset membership costs in qualifying trade or professional associations.
When Are Business Association Membership Dues Deductible?
If you regularly shell out your hard-earned wages toward the cost of membership in a professional organization, you can generally find tax relief by deducting business association dues. However, the IRS stipulates that the membership associated with these dues must be ordinary and necessary and actually help you carry out the duties of your trade. If your motivation for joining an organization is primarily for pleasure or for social purposes, those associated membership dues are not deductible.
What sorts of entities are regarded as professional organizations? The IRS casts a considerably wide net of qualifying organizations, including not only bar and medical associations and chambers of commerce, but boards of trade, business leagues, civic or public service organizations like the Kiwanis, real estate boards and trade associations. However, the fraction of membership dues that goes toward lobbying or political activities—even when applicable to your specific line of business—is not considered a deductible expense.
Before you deduct the membership dues at your local country club, note that the IRS generally excludes this and most other club memberships for business, pleasure, recreational or social purposes from being deducted as business expenses. As a general rule, the IRS cites that organizational dues are non-deductible if one of the primary purposes of the organization is to conduct entertainment activities for members or guests, or to provide members or guests with access to entertainment facilities. In addition to country clubs, these non-qualifying organizations include athletic, airline, hotel or luncheon clubs.
To What Extent Are Qualifying Business Membership Dues Deductible?
For the purposes of this deduction, the IRS distinguishes between the self-employed and other employees. As an employee, your deduction potential is limited to the portion of dues not reimbursed by an employer. However, as a self-employed individual with qualifying membership costs, you can generally fully deduct the dues incurred as itemized deductions. This can be done by listing the membership fees on Schedule C of Form 1040 as “Other Expenses.” To maximize your deduction potential, don’t forget to deduct business mileage for qualifying drives to professional organization meetings, as well as 50 percent of the costs of business meal expenses associated with these organizations.
As with other itemized deductions, it is prudent to maintain receipts and adequate records of the costs and affiliated organizations for all professional membership dues paid out. In the event of an IRS follow-up, unsubstantiated membership dues may be disallowed from deduction.
For more information about deducting miscellaneous expenses, see IRS Publication 529.
MileIQ’s blog does not constitute professional tax advice. You should contact your own tax professional to discuss your situation.