Is Golf a Business Expense?

The golf course has served as an informal boardroom, leading many business owners to question if golf costs can be deducted on a tax return. While the setting may be ideal for networking, the tax rules for these expenses are specific and have undergone significant changes. Understanding the current landscape is important for any taxpayer looking to combine business with a day on the links. The answer depends on the nature and documentation of the specific costs incurred.

The General Disallowance of Entertainment Expenses

Current tax law is clear regarding expenses for activities considered entertainment, amusement, or recreation, as these costs are not deductible. This rule, solidified by the Tax Cuts and Jobs Act of 2017 (TCJA), directly impacts the deductibility of golf-related expenses. The law disallows deductions for such activities, and golf is explicitly listed among them.

This means the direct costs of a round of golf are not deductible, even if the primary purpose is to conduct business with a client. Non-deductible expenses include green fees, golf cart rentals, equipment rentals, and caddie fees. The disallowance applies regardless of whether a business discussion takes place before, during, or after the round. The argument that an expense serves a public relations purpose is not sufficient to overcome the disallowance rule.

Furthermore, the law extends this disallowance to membership dues paid to any club organized for business, pleasure, or social purposes. This includes country clubs, golf clubs, and athletic clubs. The annual or monthly dues paid to maintain a membership at a golf club cannot be deducted as a business expense. The TCJA removed the previous ability to deduct entertainment that was “associated with” the active conduct of a business.

Potentially Deductible Expenses at a Golf Course

While playing golf is considered non-deductible entertainment, certain other business costs that occur at a golf course may still be deductible. These expenses must be distinct from the entertainment activity itself and meet all other requirements for a business deduction. The key is to separate the cost of the permissible expense from the non-deductible activity.

Business Meals

One of the most common deductible expenses at a golf course is the cost of a business meal. Taxpayers can generally deduct 50% of the cost of business meals, provided certain conditions are met. For the deduction to be valid, the cost of the food and beverages must be stated separately from the cost of the entertainment on a bill or receipt.

To qualify for the 50% deduction, the meal expense must not be lavish or extravagant. The taxpayer or an employee must be present at the meal, and the food and beverages must be provided to a current or potential business contact. The temporary rule that allowed a 100% deduction for meals from restaurants during 2021 and 2022 has expired, returning the deduction to the standard 50% limitation.

Advertising and Promotion

Certain expenditures at a golf course may qualify as fully deductible advertising expenses rather than non-deductible entertainment. The distinction is whether the expense is for general public promotion or for entertaining a specific client.

Sponsoring a golf tournament is a primary example of a deductible advertising expense. Costs associated with such a sponsorship, like fees for displaying the company’s logo on banners, signs at a hole, or in the event program, are 100% deductible. This spending qualifies as an advertising expense because it promotes the business’s brand to tournament attendees and the wider community. The deduction is based on the promotional benefit received, not the charitable status of the organization hosting the event.

Substantiation Requirements for Related Expenses

Claiming a deduction for allowable expenses like business meals or advertising requires detailed record-keeping. The Internal Revenue Service (IRS) has strict substantiation rules, and without proper documentation, a deduction can be disallowed during an audit.

For each expense, the taxpayer must maintain records that establish several elements. For a business meal, this means documenting who attended and what business was discussed. The required information includes:

• The amount of the expense.
• The date and place it was incurred.
• The specific business purpose of the expense.
• The business relationship of the individuals involved.

To meet these requirements, keep all relevant supporting documents, including itemized receipts, paid bills, and invoices. For expenses over $75, the IRS requires a receipt. Contemporaneous notes, such as a log kept at or near the time of the expense, can provide corroborating evidence of the business purpose.