When Can You Claim a Pool as a Tax Deduction?

Understanding tax deductions for home improvements like a swimming pool can be complex. It is important to distinguish between personal expenses, which are typically not deductible, and expenses incurred for income-generating activities, which may qualify for deductions or depreciation. Understanding these fundamental differences is the first step in determining if the cost of a swimming pool can provide any tax benefits.

General Rules for Personal Expenses

Personal home improvements and expenses, including a swimming pool for personal use, are generally not tax deductible. The Internal Revenue Service (IRS) typically views these as non-deductible personal consumption. These improvements may add to the home’s cost basis, which can reduce capital gains if you sell the property in the future, but they do not result in a direct tax deduction in the year the expense is incurred.

When a Pool Qualifies as a Medical Expense

A swimming pool can sometimes qualify as a medical expense, though strict conditions apply. The pool must be primarily for medical care, not for recreation or general health improvement. A physician must prescribe the pool for a specific medical condition, such as chronic pain, musculoskeletal diseases, osteoporosis, or for physical therapy. It is also necessary to demonstrate that the medical care cannot be readily obtained at public facilities.

Only the amount by which the cost of the pool exceeds the increase in the value of the home due to the improvement is deductible. This requires obtaining an appraisal of the home’s value both before and after the pool installation. For example, if a pool costs $80,000 to build but increases the home’s fair market value by $30,000, the deductible amount would be $50,000. Ongoing operating and maintenance costs, such as chemicals, heating, and repairs, can also be deductible if the pool’s primary purpose remains medical.

Medical expense deductions are reported on Schedule A (Form 1040) and are subject to Adjusted Gross Income (AGI) limitations. Only the amount of qualified unreimbursed medical expenses exceeding 7.5% of your AGI can be deducted. For instance, if your AGI is $50,000, you can only deduct the medical expenses that exceed $3,750. Medical documentation and appraisals are essential to substantiate such a claim to the IRS.

Pools Used for Business or Rental Purposes

If a swimming pool is used exclusively for a legitimate business purpose or as part of a rental property, its cost is generally not directly deductible in the year of purchase. Instead, the cost is depreciated over its useful life as a business asset or a capital improvement to a rental property. For residential rental properties, a pool is typically classified as a land improvement and depreciated over a 15-year recovery period using the Modified Accelerated Cost Recovery System (MACRS). If the pool is structurally integrated with a building, such as an indoor pool in an apartment complex, it might follow the building’s depreciation schedule of 27.5 years for residential rental properties.

Associated operating and maintenance expenses directly related to the business or rental use, such as cleaning, utilities, and repairs, can be deducted. It is important to distinguish between a pool at a primary residence occasionally rented out and a dedicated rental property, as rules for expense allocation may differ based on the extent of personal use versus rental use.

Essential Record Keeping

Documentation is essential for substantiating any claim for a pool’s cost or related expenses as a tax deduction. For all scenarios, keeping all receipts for construction, equipment purchases, and ongoing maintenance is necessary.

For medical claims, specific documentation includes a physician’s prescription, medical reports, and professional appraisals both before and after installation. For business or rental claims, maintaining records of income and expenses directly related to the pool’s use, along with evidence of exclusive business or rental use, is important. Without proper and detailed documentation, any claimed deduction is likely to be disallowed by the IRS during an audit.