My gym membership is a tax deduction. So are my running shoes. And my bike. And my Rush “2112” cycling jersey.
This is because I write about fitness for a living, and if – probably when – I get audited, I can point to hundreds of articles that prove all of these things were necessary expenses for me to make a living.
Chances are, your tax situation is different.
Here is what the IRS has to say about such expenses: “You cannot include in medical expenses health club dues or amounts paid to improve one’s general health or to relieve physical or mental discomfort not related to a particular medical condition.”
Perhaps you have a health savings account or a flexible spending account. These cards are loaded with your pretax earnings up to a certain limit each year and are to be used for qualifying medical expenses.
However, like with the IRS, elective gym memberships are not seen as a justifiable expense for these accounts.
It just makes sense to be active. Exercise increases bone strength, decreases stress, improves brain function and battles dementia, combats Type 2 diabetes, aids recovery from cancer, increases life expectancy and decreases late-life disability.
“Cardiovascular risk factors are increasing, and the No. 1 risk factor is obesity,” said Dr. Sharon Mulvagh, director of the Women’s Heart Clinic at the Mayo Clinic. A Boston Marathon qualifying runner, Mulvagh is a big advocate of exercise to dramatically reduce risk of disease and promote longevity. “More and more evidence is accumulating to prove what common sense already dictates. There are great studies out now about how exercise increases longevity as well as reduces cardiovascular disease risk.”
And heart disease is a big, expensive risk.
Mulvagh sent me projections by the American Heart Association about the health care costs associated just with cardiovascular disease, and the U.S. is currently at around $350 billion annually. By 2025, those costs are projected to exceed $600 billion, and by 2030, more than $800 billion. That’s a lot of bypasses.
And that doesn’t even get into all the other costly diseases being physically active dramatically reduces the risk for. So when you think about just how good exercise is for improving health and cutting related health care costs, the fact that things like gym memberships aren’t a qualifying health expense is a bit of a head-scratcher.
“There is nothing better long term for your health than staying in shape,” said Scott Golden, chief financial officer for the health benefits consulting company NFP/Golden & Cohen LLC.
Golden, a lawyer with an MBA and a master’s in taxation, explained the reasoning behind the government’s short-term thinking. “The loss of revenue is year-to-year, and the improvement in terms of less money spent on health care takes a long time to be realized.”
He explained that FSAs, which are more common than HSAs, would suddenly be getting maxed out if people could claim expensive gym memberships and personal trainers. Just being able to deduct your health club cost on your taxes is a further loss of annual revenue for the government.
And when it comes to revenue, the government cares a lot more about what’s coming in this year than what could be saved in future years.
But there is a loophole.
“You need to game the system a bit,” said Tony Novak, a certified public accountant in New Jersey. He literally wrote the book on health savings accounts (titled “Health Savings Accounts”). He’s another MBA with a master’s in taxation, and he spoke of “the proverbial doctor’s note” to help finance your gym membership.
“There are two ways to get a tax-free status on a gym membership,” Novak told me. “One is a doctor’s note and the other is through a corporate wellness program.” If your company doesn’t offer such a program, your doctor could go along with it. If it sounds absurd, Novak insists it’s becoming more common. People are getting not just an exercise prescription, but an actual yearly gym membership prescription.
WHAT THE IRS SAYS
I contacted Bruce Friedland in public relations for the IRS to see what the agency thinks of Novak’s claims, and Friedland replied via email that the only reason you’re allowed to expense a gym membership (with a prescription, of course) is if it’s for “the cure, mitigation, treatment or prevention of a specified disease or for the sole purpose of affecting the structure or function of the body.” (That second part seems open to interpretation.)
Friedland was explicit that general health maintenance doesn’t qualify.
WHAT INSURERS SAY
Lindsey Minella, who works for Humana, told me the insurer follows the IRS guidelines in “Publication 502.” (This answer came from Humana Vice President Dr. Fred Tolin.) She said you can’t claim a gym membership even with a doctor’s note. But I received a different answer from Aetna. Communications director Anjie Coplin pointed me to a section of Aetna’s policy stating that you can claim a gym membership, “When recommended by a health care professional for a medical condition…”
Check with your insurance company for their interpretation. And again, general health maintenance doesn’t qualify. So your doctor has to be specific (think diagnostic code).
Mulvagh thinks gym memberships should qualify for FSAs, HSAs and tax deductions. “I think we should be using carrots instead of sticks,” she said. “The government has a role to play to promote healthy living. We could cut more than half our health care costs if everyone led healthy lives.”
Health Care Services Corp., which operates BlueCross BlueShield, sees profit in being progressive on this issue. Its members have access to 7,000 fitness centers across the U.S. for only $25 a month.
“We see a tangible value in it,” said Tom Meier, vice president of product development for Health Care Services. “The costs of health care depend considerably on lifestyle choices. Members with just one core condition like Type 2 diabetes, cardiovascular disease or obesity can end up costing 2½ times more in health care.”
And Meier explained that fit workers are good for employers as well, as it reduces sick days and boosts productivity.
Fell is a certified strength and conditioning specialist and founder of sixpackabs.com.