What’s the one thing most golfers like as much as playing golf? Saving money on their taxes. Sometimes it’s possible to combine the two.
You may never deduct country club dues or the cost to play a round of golf for fun. However, if you have a business, you may be able to deduct golf-related expenses as a business entertainment expense.
To qualify for this deduction, you must discuss business with one or more people before or after you play golf--for example, you have a meal or drink with one or more business associates at the clubhouse before or after you golf together. Discussions you have while you play golf don't qualify for the deduction. Ordinarily, the business discussion should occur on the same day as the golf. However, if the people you play golf with are coming from out of town and have to stay overnight, the golf can occur on the day before or day after the discussion.
Your discussion must be “associated” with your business—that is, it must have a clear business purpose, such as developing new business or encouraging existing business relationships. You don’t, however, have to expect to get a specific business benefit from the discussion. Your business discussion can involve planning, advice, or simply exchanging useful information with a business associate.
If you qualify for the deduction, you may deduct 50% of your costs for meals, drinks, parking, greens fees, travel to and from the golf course, golf club rental, golf balls, and other similar expenses.
Example: Jack, the owner of a chain of dry cleaners, is a member of the Golden Bear Golf Club in Columbus, Ohio. Jack invites Arnie, a competitor, to play golf at his club. Before the golf, the two have lunch together in the clubhouse where they discuss Jack buying Arnie out. Jack pays for the breakfast and the greens fees for the two to play a round of golf together. After their round is over, they retire to the clubhouse bar for drinks and discuss the buy-out some more. Jack may deduct half the cost of the breakfast, greens fees, and drinks.
You don't have to be as generous as Jack above. You may take a deduction even if your outing is "Dutch-treat"--that is, you only pay for your own expenses.
It's very important to carefully document all business entertainment deductions because the IRS scrutinizes them carefully and with a jaundiced eye. You need to write down:
- the names of the people entertained
- the date and place where the entrainment took place
- the business purpose for the entertainment, and
- where you had your business discussion.
Example: Jack from the example above records the following information in his datebook: "Golf and Columbus Country club with Arnie on July 10, 20XX, preceded by breakfast at clubhouse restaurant and drinks at clubhouse bar. Discussed my purchasing Arnie's business."
Of course, you also need a record of the amount you spent--receipts will accomplish this.
To find out more about deducting business expenses, see Nolo's section on Business Deductions.