Tax Deductions & Planning
Dues and Expenses of Being a Mason or a Lion
Based on IRS regulations, club dues are generally not deductible if the organization’s principal purpose is to conduct entertainment activities for its members.
However, there are exceptions for civic and public service organizations, such as the Lions, Rotary, Kiwanis, and Civitan clubs, which the IRS recognizes as not primarily for entertainment.
The situation is less clear for clubs like the Masons or Shriners because the IRS did not name them in its regulations.
The key determinant for deductibility is whether the organization’s principal purpose aligns with civic and public service rather than entertainment. Suppose a member, such as a Mason or a Shriner, can reasonably state that their involvement primarily serves a civic purpose, similar to that of the Lions or Rotary clubs. In that case, the dues may be considered deductible.
It is also important to ensure that any dues claimed as deductions meet the IRS’s “ordinary and necessary business purpose” criteria. For example, membership in these organizations could provide business networking opportunities or enhance one’s stature in the community, which could qualify as an ordinary and necessary business expense.
Winter in Florida and Summer in Massachusetts
You can plan your tax-deductible business life to avoid cold winters and hot summers.
Spend a moment examining the following four short paragraphs containing the Andrews case’s basic facts.
For six months, from May through October, Edward Andrews lived in Lynnfield, Massachusetts, where he owned and operated Andrews Gunite Co., Inc., a successful pool construction business.
During the other six months, Mr. Andrews lived in Lighthouse Point, Florida, where he owned and operated a sole proprietorship engaged in successful horse racing and breeding operations. In addition, he, his brother, and his son owned a successful Florida-based pool construction corporation from which Mr. Andrews took no salary but where he did assist in its operations.
Instead of renting hotel rooms in Florida, Mr. Andrews purchased a home, claimed 100 percent business use of the Florida home, and depreciated the house and furniture as business expenses on his Schedule C for his horse racing and breeding business.
Mr. Andrews then allocated his other travel expenses and the costs of owning and operating this house in Florida on his individual income tax return as
- personal deductions on his Schedule A for a portion of the mortgage interest and taxes,
- business deductions on his Schedule C for the horse racing and breeding business, and
- employee business expenses on IRS Form 2106 for the pool construction business.
(Tax reform under the Tax Cuts and Jobs Act eliminates employee business expense deductions for tax years 2018 through 2025—so Mr. Andrews would change his strategy to obtaining expense reimbursements from the pool business.)
As Mr. Andrews did, you can tax-plan your life so that you spend your winters in one state and your summers in another.
In this scenario, your tax-deductible home takes the place of hotels. The other home is likely your principal residence located near your tax home.
Your travel expenses between the homes are deductible because you do business in both places. You also deduct your meals and other living costs while at the deductible travel destination.
You can have separate businesses in each state or a branch business in the second state.