Get PHIT with Uncle Sam, deduct your gym membership

Your Guide to State, Local, Federal, Estate + International Taxation

PHIT, gym membership, tax, deductionNo, it’s not a cheesy exercise video. Thanks to a recent bill passed by the House Ways and Means Committee, taxpayers now have the option to shed a few pounds while also (potentially) shedding a bit of their tax liability. The new Personal Health Investment Today Act – PHIT – adds a variety of exercise related expenses to the list of deductible medical costs. Personally, I would have named the act Personal Health Accountability Today, but PHAT may have been seen as politically incorrect, given the context.

So, what expenses are eligible? The bill includes membership at a fitness facility, participation in a program of physical exercise, and safety equipment for use in an exercise program. There is a cap on the deductible amount, though – $500 for individual taxpayers and $1,000 for married couples. Certain activities are also specifically excluded from the bill – golf, hunting, sailing and horse riding are not deductible expenses.

Before you get too excited about writing that gym membership off, remember that you’ll need to itemize your deductions to receive any benefit from medical expenses. Additionally, medical expenses are subject a 10% of adjusted gross income (AGI) threshold before being deductible. Meaning if your AGI is $100,000, only medical expenses over and above $10,000 would be deductible for federal purposes.

For these reasons, the taxpayers most likely to receive a benefit from the PHIT act are those with access to an FSA or HSA health plan. By contributing to an FSA or HSA, and then paying for eligible expenses with those pre-tax funds, you are effectively reducing the true cost of those expenses by your marginal tax rate.

For more details on how the PHIT Act can help you plan for additional tax savings, be sure to contact your friendly local CPA. And personal trainer too!

Austin Bradley, CPA