This was a question from several readers and I saw it also in Rett Nett (and I have gotten it before from clients): Paraphrasing the questions: “I am using a pool for my bad hips and artificial knees, can I write it off? The therapy helps.” “We built a pool for our special needs daughter’s well being. Are we able to write off a portion of the building of the pool since she uses it 100% for therapy? My daughter’s pediatrician says that she will give me a letter stating that it is necessary for her therapy but she was not sure if this is all that is needed to write it off on taxes.” “My doctor is an expert in hydrotherapeutic techniques and suggests that I build a pool for me and write it off.”
Other questions I have had related to that are: “I heard that you can deduct a swimming pool through interest payments on a 2nd mortgage if I used the pool on my primary residence. Is that true?”
The following response is not an answer for your specific tax situation and should only be used as a basic guideline or springboard (appropriate for the pool talk since diving board means we will make a big splash, don’t you think?) for you to do your own research and due diligence.
My answer is it depends though based on the way the pool was built, the chances are that the way you asked the question that the answer will be no. Here is why: If you were going to build the pool mainly for therapy you will need to take into account what would the value be proportionate to the total value of the pool and use by you and the rest of the family. The IRS can basically state that prior to building the pool you should have taken into account what percentage of the pool will be used for your/ your daughter’s/your parent’s medical condition and the rest for fun and frolic. Chances are that it would be disallowed.
The bible for this is Publication 502 and that is available from the IRS website. You can find out about medical related deductions and it can at least familiarize yourself with the information if you are talking to a tax professional.
What can be deductible is interest paid from a Home Equity Loan (HELOC) or refinance where you used the money exclusively for a home remodel that added value to your property. A pool qualified for adding value in most places in the country. If you use the money for buying other things (like a car, a boat, etc) that don’t add value to your primary or secondary residenc, the interest won’t be deductible.
You also need to break the 7.5% limit of your adjusted gross income (AGI) before the deduction can kick in. Depending on your income level that may or may not be a problem.
The key phrases that you need to read, re-read and then consult with your tax professional on from Pub 502 are:
“Medical expenses are the costs of diagnosis, cure, mitifation, treatment, or prevention of disease, and the costs of treaments affecting any part of the body or function.’
“Medical care expenses must be primarily to alleviate or prevent a physical or mental defect or illness. They do not include expenses that are merely beneficial to general health, such as vitamins or a vacation.”
I am not going to tell you how the doctor should write the letter but it boils down to how the doctor feels the swimming will actually help the person. In some cases it will work great. In others, not so much and it won’t make sense to go against the grain by lying or stretching the therapy beyond reasonableness. There should be a body of supporting medical evidence for the claim. By that there would have to be a lot of well-known, thorough long-term studies where they found that swimming reverses aging, cures the common cold, etc. If a doctor doesn’t think that a letter is enough to support a position, he probably deep down doesn’t think the therapy is viable for whatever condition it is prescribed for. That is just my two cents and opinion.
The mindset of the IRS is that it has to be something that has documented – legitimately – evidence of actually making a person feel better or improving their quality of life.
If swimming is prescribed as treatment or physical therapy, the cost of constructing a home swimming pool may be partly deductible as a medical expense. That initially sounds like good news, yes? However, the IRS is likely to question the deductions because of the possibility that the pool may be used for recreation. Nine out of ten times if there is something that is used for recreationally purposes normally, you can be expecting a letter to question the deduction.
If you can show that the pool is specially equipped to alleviate your condition and is not generally suited for recreation, the IRS will likely allow the deduction. For example, the IRS allowed a deduction for a pool constructed by an osteoarthritis patient. His physician prescribed swimming several times a day as treatment. He built an indoor lap pool with specially designed stairs and a hydrotherapy device. Not the sort of thing for having or holding swimming parties and orgies. Given these features, the IRS concluded that the pool was specially designed to provide medical treatment. So, if you are building the pool as a small, specific therapy machine you shouldn’t have any problems (as of now) with a deduction like that. You of course, need to due your own research, consulting with a doctor and your own due diligence. Sorry, you can’t pin the decision on me . I also advocate honesty in all your deductions and expenses.
The IRS looks at deductions that are red flags like this on a case by case basis and they will scrutinize you very closely.
My suggestion though is that if you have a legit deduction or expense, you should take it if you can support your position in it. Remember that there are other expenses for upkeep of the pool, chlorine, electricity, etc. and you need to account for that in a real, practical matter and not just try to write it all off . You will end up in the deep end of the pool with the IRS and it won’t be a fun place to float. The take away is supporting evidence, a reality check for what you are doing and getting a good tax professional if you aren’t sure what you are doing.
Also—-just because somebody else had a deduction or expense that was allowed doesn’t mean that the same circumstances apply to you. I have had clients who have tried to tell me that their neighbor took a deduction or expense with something and how come they can’t? I didn’t do their neighbor’s return so I can’t comment one way or another.
Hope that helps.
July 02 2009
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