As businesses seek innovative ways to enhance employee well-being and productivity, offering gym memberships has emerged as a popular perk. This benefit not only promotes a healthier workforce but also provides potential tax advantages for employers.
Understanding the tax benefits associated with providing gym memberships can help companies make informed decisions that align with their financial strategies.
Criteria for Write-Offs
When considering the tax benefits of offering gym memberships, it’s important for employers to understand the specific criteria that allow these expenses to be written off. Generally, if you treat the value of a provided gym membership as taxable wages, the cost is deductible as compensation, so long as it is an ordinary and necessary business expense and the compensation is reasonable for services actually rendered (2025 tax year). 1Legal Information Institute. 26 U.S. Code § 162 – Trade or Business Expenses
Additionally, the expenses should fit your business context and be supported by clear internal policies. A well-documented wellness program that explains business goals (like reducing absenteeism) and sets eligibility and usage rules can help demonstrate business purpose.
Documentation is another crucial aspect. Employers should maintain records showing the value provided, how it was treated for payroll and income inclusion, and how the program operates. Keeping invoices, payroll entries, and plan materials helps substantiate the deduction in an audit.
IRS Guidelines on Fringe Benefits
Navigating the IRS guidelines on fringe benefits is essential for employers who wish to offer gym memberships as part of their employee perks. By default, fringe benefits are taxable to employees unless a specific exclusion applies.
Gym memberships are not de minimis fringe benefits; the IRS lists “membership in a private country club or athletic facility” among items that are not excludable as de minimis benefits. 2Internal Revenue Service. Publication 15-B (2025), Employer’s Tax Guide to Fringe Benefits
A separate exclusion may apply to on‑premises athletic facilities. If you operate a gym on property you own or lease, and substantially all use during the year is by employees (and their spouses and dependent children), the value of employee use can be excluded from wages. Facilities open to the general public or located at a residential resort generally don’t qualify for this exclusion.
Treating a third‑party gym membership as a “working condition” fringe is uncommon because personal fitness costs are usually considered personal and not deductible by the employee; unless a job has bona fide, specific fitness requirements, these memberships are typically taxable.
Impact on Payroll Taxes
Offering gym memberships as a fringe benefit can have notable implications for payroll taxes, affecting both employers and employees. If the memberships are taxable, the value is included in the employee’s wages and subject to federal income tax withholding as well as Social Security and Medicare taxes. Employers should ensure proper timing, valuation, and reporting of any taxable noncash benefits.
On the other hand, if the benefit qualifies for an exclusion (such as an on‑premises athletic facility meeting IRS conditions), it is not included in wages, which can reduce payroll tax exposure for both the employer and employees.
Tax Implications for Employees
When employers offer gym memberships as part of their benefits package, employees must consider the tax implications that accompany this perk. If the membership is taxable, its value increases the employee’s gross income and can reduce take‑home pay through withholding and FICA taxes. In some cases, the added income could affect eligibility for income‑based credits or deductions.
If the benefit is excludable—most commonly through qualifying on‑premises facilities—the value is not added to wages, preserving take‑home pay.
Strategies to Maximize Benefits
Employers looking to maximize the benefits of offering gym memberships should consider a few strategic approaches. One effective strategy is to integrate gym access into a comprehensive wellness program with clear participation rules, privacy protections, and measurable goals. This aligns the benefit with business outcomes like reduced absenteeism and improved productivity.
Another strategy is to negotiate corporate rates with local gyms or fitness centers to lower cost while offering convenient options across locations. Providing several gym choices can boost participation without committing to building an on‑site facility.
Employers should also consider the use of technology to enhance engagement. Fitness apps and wearables can help employees track activity while giving employers anonymized, aggregate data to evaluate program impact. Clear communication about data use and privacy is essential to maintain trust.