Can I Buy Golf Clubs Through My Business?

Business owners often wonder if golf clubs can be a deductible business expense. While the concept might seem simple, tax regulations for assets with potential personal use are complex. Adhering to Internal Revenue Service (IRS) guidelines is crucial for compliance.

Understanding Business Expense Deductions

For an expense to be deductible, the IRS requires it to be “ordinary” and “necessary” for business operations. An ordinary expense is common and accepted in an industry. A necessary expense is helpful and appropriate for the business, though not indispensable. These criteria differentiate legitimate business costs from personal ones.

Expenses must be directly related to the business, not for personal convenience. Items like golf clubs often attract IRS scrutiny due to their potential for personal use. Therefore, demonstrating a clear business purpose is important.

Businesses must also consider “hobby loss rules” if an activity is not genuinely for profit. If the IRS deems an activity a hobby, deductions are limited to the income generated and cannot offset other income. The IRS assesses profit motive based on factors like time, effort, expertise, and past profits.

Deductibility Based on Use Case

Deductibility of golf clubs depends on their specific business use. The Tax Cuts and Jobs Act (TCJA) of 2017 changed entertainment expense deductions. Generally, entertainment expenses, including golf, are no longer deductible. This means client golf rounds or club dues for entertainment are not deductible.

While entertainment expenses are generally not deductible, business meals can be 50% deductible if ordinary, necessary, not lavish, and involve a business discussion. The primary purpose of the expense is key; if golf is primarily entertainment, it is not deductible.

Golf clubs provided to employees might be deductible in specific situations. If employees use them directly in business duties, like a golf instructor for lessons, they could be a business expense. If provided as a fringe benefit for personal use, they are generally taxable compensation to the employee.

Using golf clubs for marketing and promotional purposes offers another deduction pathway. Giving clubs as prizes in a promotion or sweepstakes can be deductible as an advertising expense. Similarly, a golf industry business, like a manufacturer, using clubs for product demonstrations would consider these direct business operations. Marketing and advertising costs are generally deductible if tied to generating business income.

The most common scenario for deducting golf clubs is their direct use in a golf-related business’s core operations. For instance, a professional golf instructor buying clubs for teaching or student use would find them ordinary and necessary business expenses. A golf course owner might deduct clubs for rental, or a pro shop for inventory. In these cases, clubs are integral to the business’s services or products.

Substantiating the Expense

Maintaining accurate records is important for any business expense, particularly for items like golf clubs that may draw IRS attention. Businesses must keep documentation, including receipts, invoices, and bank statements. These records prove the expense amount and date.

Beyond financial proof, documenting the specific business purpose is equally important. This includes the date, amount, place, and the business reason for the expense. For instance, if a golf instructor buys clubs, records should link the purchase to teaching or club fitting services. Proper substantiation is necessary to prove the deduction’s legitimacy to the IRS during an audit.

Capitalization and Depreciation

If golf clubs are a legitimate business expense, their cost is generally capitalized, not expensed immediately. Assets with a useful life over one year, like golf clubs, are typically capitalized. This means their cost is spread over their estimated useful life rather than fully deducted in the purchase year. This process is depreciation.

The Modified Accelerated Cost Recovery System (MACRS) is the standard depreciation system for tax purposes in the United States. MACRS allows businesses to recover tangible asset costs over a specified period through annual deductions. This system often provides larger deductions in earlier years compared to a straight-line method.

Businesses may also use immediate expensing options like Section 179 or bonus depreciation for qualifying assets. Section 179 allows deducting the full purchase price of eligible property, up to a limit, in the year it’s placed in service. For 2025, the Section 179 deduction limit is $1,250,000, with a phase-out starting at $3,130,000 of qualifying purchases.

Bonus depreciation permits an additional first-year deduction for a percentage of qualified new or used property. For 2025, bonus depreciation is 40% of the cost, decreasing in later years. Only the business-use portion of golf clubs can be depreciated or expensed; personal use is not deductible.