Are Swimming Pools Tax Deductible?

By Cyril Uy and Rodel Delizo

For some of us, having a swimming pool may be one of the most exciting additions that a homeowner could have. It can be a place where friends and families gather and play when the weather is warm. But to some homeowners, having a swimming pool is not necessarily for recreational purposes. It can be a place of therapeutic respite. If a medical condition is the driver for use of a swimming pool, the question is then raised, “Are swimming pools tax deductible?”

According to the guidance set forth by IRS Publication 502, medical expenses may include capital expenses such as “special equipment installed in a home, or for improvements, if their main purpose is medical care for you, your spouse or dependent.”

If recommended by a doctor in writing, the installation of a swimming pool is just one example of a potential tax deductible medical expense. However, the cost of constructing a swimming pool or swim spa may be partly deductible as medical expense because the increase in value of the property as a result of the installation of permanent improvements will not be deductible. The medical expense that will be considered as tax deductible will be the cost of constructing the home improvement less the increase in value of the property. Below is a sample worksheet discussed in IRS Publication 502:

Line 1: Enter the amount you paid for the home improvement   
Line 2: Enter the value of your home immediately after the home improvement   
Line 3: Enter the value of your home immediately before the home improvement   
Line 4: Subtract Line 3 from Line 2.  This is the increase in the value of your home due to improvement
If Line 4 is more than or equal to Line 1, you have no medical expenses due to the home improvement
If Line 4 is less than to Line 1, go to Line 5   

Subtract Line 4 from Line 1.  These are your medical expenses due to the home improvement   

In addition, the costs of operating and maintaining the swimming pool that is being used for medical purposes will also qualify as medical expenses. This rule will apply even if the cost of the original asset did not qualify or only partly qualified as a medical expense. For example, if the cost of constructing the swimming pool was less than the increase in the value of the home due to the improvement, the costs are then not qualified as medical expenses. However, the cost of electricity and water used to operate and maintain the swimming pool would be considered as medical expenses as long as the medical purpose for maintaining and operating the swimming pool still exists.

The Internal Revenue Service (IRS) would likely question the purpose of the construction of the swimming pool that was included as a deduction in the tax return. In such cases, the taxpayer could be required to show the IRS that the purpose for constructing the pool was for medical purposes and not for recreational purposes. The taxpayer should keep proper documentation, such as, a written recommendation from a doctor expressing the medical need as this may be required by the IRS.

Where would you deduct a swimming pool on your tax return? On Schedule A of your federal tax return, medical expenses can be itemized. Some things to keep in mind:

• Deductible expenses must be paid for during the given taxable year.
• Includible expenses cannot be those that are otherwise compensated by insurance, flexible spending accounts (FSA) or health spending accounts (HSA).
• Expenses must be for the explicit medical care the taxpayer, taxpayer spouse, or a taxpayer dependent and this relationship must be present either at the time of services performed or paid.
• As with all itemized deductions, expenses are deductible to the extent they exceed 7.5 percent of adjusted gross income. To calculate your deductible expenses, subtract 0.075 of your AGI from your total medical expenses.

Other improvements that are also considered medical expenses include, but are not limited to the following:

• Constructing entrance or exit ramps
• Widening doorways at entrances or exits to your home
• Widening or otherwise modifying hallways and interior doorways
• Installing railings, support bars, or other modifications to bathrooms
• Lowering or modifying kitchen cabinets and equipment
• Moving or modifying electrical outlets and fixtures
• Installing porch lifts and other forms of lifts (but elevators generally add value to the house)
• Modifying fire alarms, smoke detectors, and other warning systems
• Modifying stairways
• Adding handrails or grab bars anywhere (whether or not in bathrooms)
• Modifying hardware on doors
• Modifying areas in front of entrance and exit doorways
• Grading the ground to provide access to the residence