Financial Questions and Answers
Q: I entertain many clients at my golf club. Can I deduct the cost of my club’s annual membership fees as a business expense?
A: You’ll end up in the rough if you try to deduct the cost of your membership. The tax code generally bars deductions for the cost of membership in any club organized for business, pleasure, recreation, or other social purpose, such as country clubs, golf and athletic clubs, airline clubs, hotel clubs, and business lunch clubs. However, dues for membership in professional and trade associations or civic and public service organizations are deductible.
Q: One of my goals for the new year is to get my finances in order. Starting an emergency fund is a priority. How much should I set aside in this fund?
A: Having a cash reserve to cover the costs of financial emergencies is a good idea. Without one, a job loss or an illness could threaten your financial stability and your ability to pay everyday expenses. A general rule is to have an emergency fund that will pay three to six months of your living expenses. However, the amount you set aside should be specific to your unique circumstances. You might want to set aside more if your employment is not very stable, your income is based on commission, or you are self-employed. Consider also whether a partner’s earnings could provide a financial buffer.
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