While Canadians must wait for legislative actions before their trips to the links may be deducted, those living in the land of the free and home of the brave have plenty of options to reduce their tax liability with golf expenses.
2012 might be the year Canadians can finally deduct golf from their taxes. Laws currently bar businesses from using golf as a tax deductible business expense. The Wall Street Journal reports that a group of two dozen Canadian parliamentatarians are pushing Finance Minister for a tax change. Prior attempts have been made, but to no avail.
Meanwhile, the US congress doesn’t seem any closer to simplifying the income tax system, which means more slicing your drive, but less tax liability.
Golf as a Business Expense
IRS publication 463 allows for businesses to deduct some golf expenses as a business expense. However, there are some tests and rules that must be met to be tax deductible.
The general rule is that golfing expenses are tax deductible if they are ordinary, necessary and are used to entertain a client, customer or employee. The IRS has established the directly-related or associated tests to determine if your golf outings meet this rule. You’ve passed the directly-related test if the main purpose of the golf excursion was to conduct business and during the meeting you discussed business and you have a good expectation of receiving a business benefit. The associated test is satisfied if golfing is associated with your trade or business and the golfing event occurred immediately before or after substantial business discussions.
As with most income tax law, there are restrictions. Generally, only 50% of entertainment expenses are tax deductible. Also, membership fees and dues are not tax deductible.
Golfing for Charity
Charity golfing can be deductible for both individuals and business expenses, so long as the charity is sponsored by a qualified organization.
For businesses, charitable donations for golfing events are fully deductible and are not subject to the 50% entertainment restriction. However, the charitable event most be staffed primarily by volunteers and all net proceeds must go to the charity.
For individuals, IRS publication 526 may allow for a portion of charitable golf tournament fees to be deductible. However, since you are receiving a benefit (playing golf), only the portion you pay for the charity event that exceeds your normal costs of golfing may be deductible. Also, you must itemize your deductions to write off the charitable contribution.
Golf for College Credit
Need physical education credits to graduate college? Pick golf and you can deduct your college golf classes as an educational expense.
There are two ways college tuition expenses can be deductible and they depend on how you pay for tuition. If you have paid tuition out of pocket, then tuition is fully deductible and you do not need to itemize to deduct. If you used college loans to pay for tuition, then interest paid on that tuition expense is tax deductible.
In America, golfing is more than fun, it’s tax deductible.
- Crazy Tax Deductions: 10 Claims That Didn’t Quite Fly (dailyfinance.com)
- Six Tax Deductions You Don’t Want to Miss This Year (bargaineering.com)
- Pay These Bills Early to Boost Your Tax Deductions (turbotax.intuit.com)
- Zolt: Tax Deductions for Charitable Contributions for Domestic and Foreign Activities (taxprof.typepad.com)