A couple years ago I was watching Leno when he had on the Taxmaster ((Hello!)
He was doing some tax Q and As and one of the things he said really stuck out to me because, if true, I think would really help my dad.
Someone asked (paraphrasing) “If I had a doctors recommendation saying that there was a medical need for me to have a swimming pool in my back yard could I write that off as a medical expense”
The answer was a resounding yes. And not just a “yes you can” but rather it was a yes you could write off EVERYTHING. The pool, construction, landscaping, pool supplies…everything that was involved with putting in the pool could be written off.
It’s not that I doubt Patrick Cox, but this all seems a bit unbelievable. I am curious as to how true this is because my dad has had chronic back problems his whole life, and after multiple surgeries and reconstructions and the whole nine yards he is still having problems and a theraputic hot tub would be perfect for him.
If my dad could have his doctor say that the hot tub is needed for his health (he most definitely would) could my parents write off everything surrounding that tub as a medical expense? They would need to probably knock out a wall, install and reroute some plumbing, put an addition on to their bathroom and obviously buy a nice big hot tub…and just write the whole thing off?
If there are any accountant dopers out there who could give me the straight dope on this situation?
First of all, you need to stay away from the term ‘tax write-off’. It is a colloquialism that probably doesn’t mean what you think it does although the misunderstanding is surprisingly widespread. What most people refer to as tax ‘write-offs’ are actually tax deductions which, again, probably doesn’t mean what you think it does. Tax deductions just mean that you pay for something like a charitable donation or, in this case, a swimming pool and you still have to pay for it but you subtract that part of the expense from your taxable income.
It is still by no means free to you. You still pay for all of it directly but your overall tax burden gets reduced according to the tax brackets you are filing under. To put it in real terms, a swimming pool that cost 30K might have some tax offsets that reduce the real cost by 20% - 30% depending on the person’s income and overall tax situation but you still pay have to pay for all of it up front.
Whether a swimming pool is allowed as a tax deduction, is between you and the IRS. It isn’t impossible but they don’t look very favorably on people that try unusual tax deductions as a general rule. Some people fight them and win but it costs money to fight them as well so much or all (or more) of the money you would have saved will simply go to the tax attorneys.
Here is a relevant Seinfeld clip on the fallacy of tax write offs:
Although there are many articles on the internet from self-proclaimed tax experts talking about deducting swimming pool costs, the very comprehensive IRS Pub-502 (pdf), which lists both eligible and ineligible medical expenses, makes no mention of them, although it does say that swimming lessons are ineligible. However:
It’s worth taking a look at the publication to get a better sense of the rules regarding medical expense deductions, including the 7.5% limit (you can deduct only the amount of your medical and dental expenses that is more than 7.5% of your adjusted gross income).
That is correct. I just threw the 20% - 30% savings out as an example but what you say is true and means that the true savings, even if it was allowed somehow, would be substantially lower. You would have to look at the entire tax situation of the person in question but it certainly does not equal a free swimming pool or anything close to it. It would be a small discount at best and you would still have to pay for the whole thing and try to get that some of that money back through favorable tax deductions (which may not be allowed at all).
In addition to the other limitations mentioned, it is important to note that deductible medical expenses must be linked to the treatment of a specific condition. This means that most preventative or merely helpful expenses are not deductible. For someone with a history of back surgery and other problems, it is plausible that a spa would be a treatment for that condition. But if you just want to relax after a long day at the office, or if you think that a spa will prevent back problems, you’re out of luck.
Also keep in mind the necessary documentation. It’s one thing for a doctor to casually say “Yeah, a spa would help” and another thing to get them to write down the words “A spa is a recommended treatment for your condition.” I would also prepare other documents in case of an audit - proof of the condition, research into alternative treatments, appraisals of the property and bids for the work. You want to be able to show the IRS that you didn’t want a hot tub - you just had no other choice.
I agree with the other posters. It sounds like a great way to get audited and lose. The therapeutic benefits would, to a reasonable observer, seem to be outweighed by the luxury.
ETA: NM…about depreciation…not a business expense. My tax law class is still bouncing in my head…
