Hot Tub Tax Deduction
How to Write Your Hot Tub off as a Medical Expense on your Taxes
A medical tax deduction expense will usually reduce your cost of owning the hot tub by 25%-40%.
The reason it’s not a direct 100% cost reduction is that it’s a tax deduction, not a tax credit. A deduction reduces the amount of your taxable income while a credit directly reduces the amount of taxes owed.
But the important thing is, if you qualify for the deduction, you can enjoy a relaxing and healthful spa experience at home for a drastic reduction in cost. The caveat is that you must carefully prepare for the tax deduction so that you have all your ducks in a row. Below, we discuss the steps you need to take prior to buying a hot tub so that you can take it as a qualifying medical deduction on your next income tax return.
#1 Get a prescription
The first step that must be taken to make a medical deduction possible is to request a doctor’s prescription for the hot tub as a “medical device.” Section 213(a) of the tax code says a medical expense is deductible “if its primary purpose is the diagnosis, cure, mitigation, treatment, or prevention of disease.” Some of the conditions that may qualify for a hot tub prescription include:
- Chronic back pain
- Chronic depression
- Type II diabetes
- Certain injuries
Essentially, any condition that can benefit from hydrotherapy is likely eligible. You must have a prescription from a medical doctor (a prescirption from a chiropractor, nurse practitioner or non-MD homeopath typically will not qualify).
#2 Choose a spa
The cost of a one to three person spa is appropriate when you have a health prescription, but trying to deduct the cost of a nine person spa will likely land you in hot water (no pun intended). However, if you do decide to purchase a larger spa, you should not try and deduct the whole cost. Instead, deduct only the cost of a one or two person spa and prepare to pay the full difference between the larger and smaller spa. Also, if you are constructing a large deck to accommodate the spa, it likely won’t be wise to try and deduct that. Instead, deduct the standard installation cost and lesser cost of a smaller spa.
#3 Track expenses
You need to make sure you have your physical prescription and that it’s dated prior to when you purchase your hot tub. Also, keep receipts for the purchase, installation and any maintenance costs. Your routine maintenance expenses in years to come may also be deductible so long as your health circumstances are unchanged. When it comes to the IRS, err on the side of over-documenting. You won’t have to file any of the receipts or papers when you submit your return, but you will have to show it all in case your return is audited.
#4 File your taxes
Medical deductions are submitted on Schedule A of Form 1040. There are a few conditions that must be met to deduct the medical expenses in addition to the medical requirements. These include:
- You must itemize deductions rather than using the standard deduction.
- If you are under age 65, you may only deduct medical/dental expenses that exceed 10% of your adjusted gross income (AGI).
- If you are over 65, you may deduct medical/dental expenses that exceed 7.5% of your adjusted gross income (AGI).
For instance, if your AGI is $50,000 and you are under 65, you can deduct qualifying medical expenses, including your new hot tub, that exceed $5,000 ($50,000 x 10%). For instance, if your hot tub costs $6,000 plus you have another $6,000 in medical expenses, that’s $12,000 total. You can deduct the amount that exceeds the AGI percentage. In this example you could deduct $7,000 of expenses ($12,000 expenses incurred minus $5,000 AGI threshold).
To make sure you get the greatest benefit allowable under law, you’ll want to consult a certified tax professional. IRS Publication 502 details qualifying deductions. You should look back at all your medical expenditures to ensure you maximize the benefit allowed under law. These include co-pays to your doctor, pharmacy, eye doctor or dentist and co-insurance costs for procedures where your insurance only covers a percentage.
You may also be able to include your insurance premiums under certain circumstances. So long as the medical service wasn’t cosmetic, it usually counts. This includes eye glasses, chiropractic treatments and more. If you weren’t keeping your co-pay receipts, request copies from your medical providers, pharmacy and check your insurance web-site for co-insurance information.
The primary benefit of owning a hot tub is not the tax deduction but the health benefits. However, if you can recoup some of the expense via a medical deduction on your taxes, that may enhance your enjoyment even more. Hot tubs are a great way to relax and unwind after a hectic work day, loosen up the aches and pains of chronic back and muscle problems and ease the nerve pain that comes with Type II diabetes, fibromayalgia, lupus and other disorders.
To find out more about what hot tub is best for your medical concerns and your lifestyle, come into Black Pine Spas in our greater Seattle location on Lake Ballinger Way in Edmonds, WA. You can reach us at (425) 771-5774 or click here to schedule a private wet test of a swim spa or hot tub in our showroom so you can try before you buy. And as always, we will beat any local competitor advertised price. Our customers love us – click here to see video testimonials or check our our five star reviews on Yelp.