Deducting the Cost of a Spa from Your Income Tax
Everyone knows about the advantages of warm water spas. They promote relaxation, family fun and improved health. But did you know that in certain cases spa ownership can also help you out with your income tax?
According to IRS Publication 502, certain medical expenses are deductable when filing federal income tax. Medical expenses are defined as the costs of diagnosis, cure, treatment, mitigation or prevention of disease. They also include the costs supplies, equipment and diagnostic devices used for these purposes.
The cost of a swimming pool or a spa may be deducted if swimming, hydrotherapy and other forms of warm water exercise are prescribed as treatment or physical therapy. ThermoSpas products offer a wide range of hydrotherapy options, including specially designed exercise and swim spas.
Bear in mind that medical care expense deductions must be primarily to alleviate or prevent a physical or mental illness or defect. They cannot include expenses that are incurred in the pursuit of general health benefits.
You can deduct capital improvement expenses if they are incurred for the installation of special equipment in the home. But their primary purpose must be for the medical care of the tax payer, the spouse or a dependent. The cost of permanent improvements that increase property value may be partially included as medical expenses. Reduce the cost of the improvement by the increase in property value. Only the difference may be deducted as a medical expense. If the improvements result in no increase in property value, the entire cost can be considered a medical expense. Have your property appraised to determine actual increase in value.
However, you should be aware that the IRS may question the deductions on the grounds that the pool or spa may also be used for recreation. If you can show that the spa is specially equipped to alleviate your medical condition, the IRS will be more likely to allow the deduction. For example, if an osteoarthritis patient’s physician has prescribed daily swimming as treatment, and certain disease-specific features are included in the spa (such as hand-rails, hydrotherapy devices, etc.), the IRS would likely allow the deduction. The key point is that you must demonstrate that the spa was specially designed to provide medical treatment. Before deducting the cost of a spa, contact your physician, your tax professional and the ThermoSpas support staff (1-800-876-0158).
In general, only reasonable costs required to accommodate a home for an ill or disabled person are considered by the IRS as legitimate medical care. Any costs incurred for other reasons, such as for architectural or aesthetic purposes, are not considered to be medical expenses.
Operating and maintenance costs for a capital asset, such as a spa, are considered to be hidden costs and are deductable, even if none or only a portion of the capital asset was considered to be deductable. Such costs include water, electricity, cleaning, repairs, chemicals and maintenance. Again, contact your tax professional before taking these deductions.
Thorough record keeping is absolutely essential. Properly document all medical expenses with receipts. Also be sure to retain a written recommendation from your doctor expressing your medical requirement. Any expense that can be considered personal, and not medical, is not deductable. However, this shouldn’t discourage you from deducting legitimate medical expenses.
The IRS examines large deductions for medical expenses, and a doctor’s recommendation is not a guarantee of IRS approval. Sometimes, the IRS disputes the medical necessity of expenses, even when a doctor’s recommendation is provided as justification. IRS Publication 502 includes a complete list of authorized medical expenses and also spells out those that may not be deducted.
If you plan to deduct spa expenses from your federal income tax, consult a qualified tax professional and review IRS Publication 502. Also, remember that tax rules change from year to year.