Most taxpayers deduct medical expenses on their tax returns either as individuals or through businesses. Deductions like health insurance premiums or doctors and dentists fees are pretty black and white if you are being treated for illness. But what about that gray area of preventative medicine including supplements, gym memberships and fitness equipment and similar nontraditional alternative medical cures and treatments? Take for example the cost of joining a gym. You are not unhealthy or sick but your doctor tells you to join a gym. You know that the medical community says regular exercise promotes good health. In fact, more and more health insurance plans are covering the cost of a gym membership as evidence that working out builds the immune system to fight off cancer and other disease. Has the time come for the IRS to recognize that gym membership fees are medical expenses? I call these tax deductions “Healthy Livings Tax Deductions” (HLTD): Unfortunately the Courts have been reluctant to recognize HLTD as bonifide tax deductible medical expense. Let’s take a better look at why HLTD are so controversial, particularly with gym memberships. I invite you all to meet me in a few minutes for a brief tax deductible work out at your local Tax Court to see how the case law is trending about gym memberships these days. So let’s get started on our HLTD workout.
In order to see the IRS mindset on gym memberships we start off at a slow but steady pace with Humphrey vs Commissioner TC Memo 2013-198. In this 2013 case medical care is defined as amounts paid “for the diagnosis, cure, mitigation, treatment, or prevention of disease, or for the purpose of affecting any structure or function of the body.” Mr. Humphrey fought Pro Se against the government and actually won the right to deduct his supplements to help with his Prostate cancer. How did he win? Judge Goeke felt that Humphrey provided credible testimony regarding studies from Harvard Medical School, and the Mayo Clinic promoting the use of supplements to prevent cancer. Unfortunately Humphrey lost the right to deduct his gym membership. Why? Because the Court said to deduct gym membership as a medical expense, a taxpayer must show the expenses were in excess of or different from what he would normally spend for personal purposes. The Court cited: Fred W. Amend Co. v. Commissioner, 55 T.C. 320 (1970). Amend was a company that hired a spiritual advisor for the health of an executive. The IRS said spiritual advisor expense was not a medical deduction deductible by the company. Amend appealed to the 7th Circuit and lost.
I don’t know about you all, buy regardless of whether Amend won or lost, what does Amend have to do with a gym membership? Is the best the government can do to cite a 43 year old case? Judge Goeke stated that Humphrey failed to show the gym membership to Bally Total Fitness was in excess of or different from what Humphrey would normally spend. So perhaps if Humphrey had consulted with his Doctor about joining a top of the line $1000 per month health spa the membership would qualify as an HLTD? Actually better yet Humphrey should have had a Doctor and an Attorney at court with him. In my view he would have perhaps had at least a chance to win. But don’t let this diversion get you distracted from your work out.
Let’s pick up the pace with Battle v Commissioner T.C. Summary Opinion 2007-27, Mr. Battle says as a fireman his “my tool is my body” and therefore required a gym membership. Special trial judge Dean disagreed. A gym membership fee is an inherently personal expense. It is desirable to be physically fit regardless of one’s profession. Mr. Battle has not offered any evidence to show that his gym expenses were different from or were in excess of what he would spent for personal reasons. Id at 9-10. I’m sorry, but are you thinking what I’m thinking? This taxpayer says “my tool is my body” and he thinks he is going to win in US Tax Court with a $708 annual gym cost in 2002? You guessed it, Mr. Battle went up against the Government Pro Se. I think he would have been better off hiring a tax attorney.
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Warning: Maximum performance ahead with Hamper v Commissioner Tax Court Summary Opinion 2011-17. Ms. Hamper was a television news anchor. She deducted a gym membership because her position as a news anchor made her a public figure in her local area. Hemper was one of the unfortunate public figures affected by stalking and was advised by the local police to undertake self-defense classes as a protective measure. Special Trial Judge Dean (yes the same judge from Battle) says that “….although petitioner testified that she enrolled in self defense classes with a private instructor, the only substantiation relating to self-defense classes for the years at issue was her gym membership dues at Lifetime Fitness. Furthermore, petitioner’s daily log for 2005, which provided a detailed account of her weekly schedule, does not indicate that she attended self-defense classes. On an almost-daily basis petitioner noted her workout for each day, which included kickboxing, yoga, running, walking, weights, and cardio. But any reference to self-defense classes was notably missing from the log….” (Id at 12). Judge Dean ruled in favor of the IRS and disallowed her gym membership. Unfortunately just like Battle, Hamper was not represented by a tax attorney.
Great workout. Let’s spend time to rest and reflect on a very taxing question: Do you spend a lot of money on health care for you and your family but have not deducted your gym membership on tax returns? You may have HLTD if you purchase a high end specialized gym membership for you all. Don’t forget to obtain a doctor’s letter approving and recommending your membership as as it applies to your specific health situation. If your tax advisor agrees, you might be able to deduct the difference between a regular low end membership and the high end specialized program you signed up for. Finally make sure you attach your doctor’s letter into your tax return prior to filing to bullet proof the return in the event of an audit.
See you next time at the gym on TaxView.
Submitted by Chris Moss CPA
