Almost everyone loves soaking in a hot tub. But sometimes, people want to soak due to a medical condition or some underlying health issue. So, in that case, since we know some medical expenses can be written off on taxes, can a hot tub be tax deductible?
Now, I’m no accountant, but I did some research into this, and this is what I found out.
A hot tub can be claimed as a tax deduction if it will help overcome an injury, illness, or other medical condition where hydrotherapy will be of benefit. But a doctor will have to prescribe it in order for it to be considered a qualifying expense.
The advice given here is of a general nature, and you should always discuss this with your accountant before deducting any costs on your tax return.
OK, let’s dive in and find out what you need to do if you want to claw back some tax for your hot tub.
— Style Spas Limited (@stylespas) November 20, 2015
Can a hot tub be a medical expense?
A hot tub can be a medical expense if you have been prescribed hydrotherapy by a doctor. To receive a prescription for a hot tub, a serious underlying medical condition would need to be present, and the primary use of the hot tub needs to be for medical reasons.
Some of the types of medical conditions that could make a hot tub be deducted as a medical expense include:
- Severe and regular back pain
In particular, a regular soak in a hot tub for a short period is beneficial for those suffering from arthritis, fibromyalgia, and other joint or muscle disorders.
So, if you suffer from any of these conditions, you may be able to get your doctor to prescribe you a hot tub.
Medical expenses cover the costs of diagnosis, mitigation, treatment, or prevention and must be used primarily to alleviate a physical disability or illness.
Expenses that are just beneficial to general health are excluded. Qualifying expenses include payments for legal medical services and the costs of equipment and supplies.
Although you can only claim medical expenses for the current year, you can claim a refund for a previous year using IRS Form 1040-X. So, even if you bought the hot tub last year, you may still be able to claw back some tax.
For more information on medical expenses, download IRS Publication 502. This will tell you all you need to know.
— Charles Hampshire (@LMHampshire) December 31, 2018
Do I need a hydrotherapy prescription for a hot tub tax deduction?
For a hot tub to be claimed as a tax deduction, a prescription for hydrotherapy is needed from a doctor to prove that it is a genuine medical requirement.
You only have to prove you need the hot tub for medical reasons, and a doctor is the person to verify that.
If the IRS audit you, and the likelihood of that happening depends on where you live, it is always worth being prepared for that call and have all the documentation you need to hand.
The documentation would include things such as:
- Medical records
- A prescription from your doctor indicating that a hot tub would be extremely beneficial in treating your injury or condition
- Any X-rays or MRI scans
The hot tub needs to be primarily for alleviating a medical condition, so if you install a luxury, top-of-the-range 8-person hot tub at $20,000, that will look mighty suspicious on your tax return, so be realistic.
The prescription will only cover hydrotherapy, not spa parties for all the family.
That is not to say you can’t have a big hot tub, just don’t deduct the actual cost of installation, deduct a much smaller cost instead.
— DMA Tax (@DMATax) March 28, 2017
How much of a tax deduction can I get for a hot tub?
As a general rule, the tax deduction for the medical use of a hot tub reduces the total cost between 25-40% of the initial cost of purchasing and installing the hot tub. However, ongoing maintenance and chemical costs may be deductible as long as the health issues remain.
Remember, it’s not just the capital cost of installing a hot tub.
You need to consider the operating costs as well, which I explained in a recent article. You can read all about it here on my website just by clicking on the link.
The amount of tax deduction you can get for your hot tub is dependent on several factors. If your doctor has prescribed a hot tub as a form of treatment for your condition, the IRS will consider:
- Whether the tub will be used exclusively to treat the condition
- How long it will take to treat the condition
If you need the hot tub to treat an injury, once the injury is fixed, the benefit will cease, but you will continue to have a hot tub. In this case, there will have to be an adjustment against the expected lifespan of the hot tub.
If, on the other hand, you need to treat a long-term condition such as arthritis, you could get a tax deduction year on year for the running costs as well as the capital cost.
It is difficult to say how much of a tax deduction you might get as it depends on your tax bracket. You should discuss this with your accountant, but it could be as much as 40% of the purchase price.
The capital cost will have to be offset against the increase in value of your home as a result of installing an in-ground hot tub – you can’t have it both ways, unfortunately.
Use IRS Schedule A (Form 1040 or 1040-SR) to work out your itemized deductions. Generally, you can deduct only the amount of your medical expenses that are more than 7.5% of your annual gross income.
There are a few other conditions to be aware of, though, including:
- The taxpayer must itemize deductions instead of using the standard deduction
- If under age 65, deductible medical expenses must exceed 10% of your adjusted gross income
- If over age 65, deductible medical expenses must exceed 7.5% of your adjusted gross income
It’s also worth noting that tax laws change all the time, AND I am not an accountant. So always check with both your doctor and an accountant before making a purchase like this, assuming it will be tax-deductible.
What is adjusted gross income?
This is simply your total income reported on your taxes minus adjustments such as:
- Educator expenses
- Student loan interest
- Alimony payments
- Contributions to retirement accounts
So, if you’re under 65, just multiply your adjusted gross income (AGI) by 10%. For example, if your AGI is $60,000, 10% of that would be $6,000.
So you could not deduct a budget hot tub that only cost $5,000. Any approved medical equipment would need to cost more than $6,000.
We could all use this level of relaxation every now and then. How highly would you value a hot tub in your next home search?
Monica McGinley, Broker/GRI
House 2 Home Realty pic.twitter.com/S6nAgzWgF0
— Monica McGinley Broker (@monicah2hrealty) December 22, 2018
Is a hot tub a capital improvement?
A portable hard-sided hot tub delivered and installed at a house is not a capital improvement as it is not permanently affixed to the property and could be removed without damaging it. A permanent, in-ground hot tub, which often accompanies a pool, would be considered a capital improvement.
So what exactly is a capital improvement?
Capital improvements are things such as permanent structural additions that add value to your home or maybe extend the life of the property. General maintenance and repair aren’t considered capital improvements because they are necessary to prevent the home value from dropping.
Specifically, a capital improvement must meet all three of the following criteria:
- It adds to the value of the real property in a significant amount.
- It becomes a permanent part of the property and is affixed such that removal would cause material damage to the property or item itself.
- It is intended to be a permanent addition and not temporary or something that would be moved with the owner if they sell the house.
The keyword there is permanent, and if your hot tub is a portable one, it will not count as a capital improvement.
Hot tubs are either in-ground or portable, and the portable type includes inflatable, plug-and-play, and the larger Jacuzzi style hard-sided spa.
Some of these can be made permanent by building them into decking, but whether that adds value depends on whether the buyer wants a hot tub or not. But even then, it probably doesn’t meet the test as the decking could be removed and the hot tub moved.
How much an in-ground hot tub adds to the value of your property depends largely on:
- How old the hot tub is
- If it’s a well-known brand like Jacuzzi, Hot Spring, or Master Spa
- If it’s in good condition
- The perceived value from the prospective buyer of the house
Like anything mechanical or electrical, it starts to age as soon as it’s installed. But on average, a decent hot tub will add about half the installation cost to the value.
So, if you built an in-ground hot tub for $20,000, that would add roughly $10,000 to the value of your home, but don’t forget you will have to offset this against any tax deductions made earlier.
You may have noticed that some hot tubs are quite expensive, particularly at the higher end of the scale, but several factors affect the cost.
So it is worth shopping around to get a good deal. You can find more information on this in a recent article. I get into why hot tubs cost so much and some crucial tips that could save you as much as 20% off the cost.
Just click that link to read it on my site.
So if I do hot tub streams can I write off this additional square footage as a business expense on my taxes? pic.twitter.com/M2NnmZcCfJ
— Brian Kibler (@bmkibler) May 27, 2021
Can you write off a hot tub as a business expense?
A hot tub could only be considered a business expense if the hot tub is an essential part of the business. An example would be a hot tub in a showroom that is for demonstration purposes or a hot tub in a spa where paying customers use the hot tub.
Most people purchase a hot tub for personal use, not for business, but there are other things you could look at.
Alternatives to tax deductions
An alternative to claiming on your tax return is to look at your automobile or health insurance policy, or if you’re suffering from an injury that wasn’t your fault, the third party’s insurance policy may cover some or all of the expense.
You will need the same type of documentation mentioned above. For third-party insurance claims, you will need a report from your doctor stating that your injury was ‘causally related’ to the accident.
A word of warning:
If you do get a tax deduction, then in the following year, the insurance company pays you compensation, you will have to reimburse the cost of the deduction in next year’s tax return.
If you have had to make other modifications to your home to help you get around, such as forming ramps or fitting handrails, the cost of these might also be tax-deductible, so it’s worth looking at this as well.
Did I cover everything you needed to know about tax deductions for hot tubs?
I hope I answered all your questions about tax deductions on your hot tub.
If you want to claim a tax deduction, it would probably be better to buy a mid-range portable hot tub as this will add nothing to the value of your home and will be looked upon more favorably by the IRS.
So skip that luxurious $25,000 hot tub.
For those suffering long-term health conditions, it is much easier to get a tax deduction than those who have a short-term injury – in this case, you should look at your insurance policies.
If this is your first venture into the world of hot tubbing, you should read this recent article on my website. I get into the 23 crucial things to know before buying your first hot tub. I even covered the 1 thing no one thinks about that can easily save you $1,000.
Just click that link to read it on my site.