If a business pays the cost of membership at a golf or country club, the dues are not deductible. However, an employee who uses the club for business can exclude the benefit from income. However, the business can convert this nondeductible cost of the business into a deductible expense by electing to treat the benefit as additional compensation to the employee and deducting the cost as compensation.
The employer reduced his taxable income by $5,000 by paying for the country club dues of his employees. Since the business income was taxed at the 30% tax bracket, the income reduction may decrease its income taxes by $1,500 ($5,000 x 30%).
If you are in a combined (federal, self-employment, and state) tax bracket of 30%, you could reduce your taxes up to $300 for every $1,000 of income reduction by deducting the cost of golf or country club dues for an employee.