A hot tub is a luxurious addition to your home, offering relaxation and health benefits. But you might wonder, "Is a hot tub tax deductible?" While luxury hot tubs are generally not tax-deductible, there are scenarios in which you can claim them, especially if they are deemed medically necessary. 

Let's explore how a hot tub can be used for tax savings. Additionally, we'll discuss whether similar wellness investments, like saunas and cold plunges, offer any tax advantages.

Can a Hot Tub Be Tax-Deductible?

The short answer is yes: a hot tub can be tax-deductible if a doctor prescribes it to treat a specific medical condition. The IRS allows deductions for medical expenses, including equipment, when necessary for diagnosing, treating, or preventing disease.

Interestingly, saunas and cold plunges may also qualify in certain situations if they serve a prescribed medical purpose, such as improving circulation, relieving chronic pain, or aiding post-surgical recovery.

However, this deduction applies only to the portion of the hot tub expense related to its medical use, not the entire cost. Suppose you're considering a designer hot tub for medical purposes. In that case, consulting with a tax professional to confirm that you meet all requirements and understand the rules before making any claims or purchases is essential. 

Capital Improvement vs. Medical Expense

If you're transforming your home into a wellness retreat, a hot tub can also be considered a home improvement. Increasing your property's value may be categorized as a capital improvement, limiting your tax benefits. However, using the hot tub for medical treatment is considered a medical expense, which may provide broader deductions.

The same considerations apply to saunas and cold plunge pools. For example, a sauna might improve your home's resale value, but only the medical use portion of its cost would qualify as a deduction.

Qualifying Medical Conditions for a Tax Deduction

For a hot tub to be considered a qualifying medical expense, a doctor must prescribe it to treat a specific medical condition. These conditions include:

• Arthritis
• Fibromyalgia
• Chronic back pain
• Peripheral neuropathy
• Cardiovascular rehabilitation
• Severe psoriasis
• Post-operative recovery

People sometimes use cold plunges to treat conditions like inflammation, post-exercise recovery, and chronic pain. In contrast, they use saunas to help with conditions such as hypertension, stress relief, or detoxification therapy. In each case, you must document the medical necessity.

IRS Tax Guidelines for Hot Tubs Deductibles

To claim this deduction, the IRS requires several things:

1. Obtain a doctor's prescription: A licensed medical doctor must provide a written prescription that states the hot tub is necessary to treat a specific medical condition.
2. Select an appropriate spa: Choose a smaller hot tub that meets your medical needs. Larger models like a luxury 6-person or 12-person hot tub may not be fully deductible. The same rule applies to saunas — oversized models designed for social or recreational use may not be considered fully medical in purpose.
3. Track all expenses: Keep detailed records of your hot tub's purchase, installation, and maintenance costs.
4. Claim the hot tub on your tax return: Itemize the deduction on Schedule A of Form 1040.
5. Meet the adjusted gross income (AGI) threshold: Medical expenses must exceed 7.5% of your adjusted gross income or AGI.

Using FSA or HSA Funds for Wellness Products

A few companies, such as TrueMed, now allow customers to use their FSA (Flexible Spending Account) or HSA (Health Savings Account) savings on products like hot tubs, saunas, and cold plunges. These accounts let you spend tax-free money you've already saved for medical expenses, making them an excellent option for purchasing wellness equipment that qualifies as medically necessary. Be sure to verify with your FSA or HSA provider whether your purchase meets their criteria. Keep all the required documentation for approval.

How to Calculate Tax Deductibles on Your Hot Tub

Here's a detailed example: 

• Assumed AGI: $100,000
• Medical expense threshold: 7.5% of AGI, which equals $7,500.
• Assumed total medical expenses (including the hot tub and other eligible medical expenses): $20,000.

Now, to calculate the deductible amount. Subtract the medical expense threshold from your total medical expenses:

$20,000 (assumed total medical expenses) - $7,500 (medical expense threshold) = $12,500

The deductible is $12,500, which you can claim on your taxes, assuming the hot tub qualifies as a medical expense.

Steps to Claim a Hot Tub Tax Deduction

Here's how to deduct a qualifying hot tub from your taxes.

1. Choose the Right Hot Tub

Select a hot tub that is suitable for medical use. Smaller models, like a hot tub for two or a 3-person hot tub, are typically easier to justify as a medical expense. Focus on features that align with your health needs, such as targeted jets for arthritis relief or precise temperature controls for pain management. The IRS requires you to demonstrate that the primary use of the hot tub is medical treatment, not just for relaxation. Opt for a model that serves a specific therapeutic purpose and avoid large spas that may be harder to deduct.

If you're also considering a sauna or cold plunge for therapeutic purposes, look for models emphasizing medical functionality, such as infrared saunas or compact cold plunge tanks that are easier to justify as medically necessary.

2. Document Your Expenses

Keep meticulous records to support your tax claim. Track:

• The original purchase receipt for the hot tub.
• A detailed list of installation costs.
• Maintenance and repair receipts.
• Utility bills show the increased energy costs from running the hot tub. Also, log your hot tub usage, noting dates, duration, and the health benefits you experience. This will prove that you primarily use the hot tub for medical purposes. These documentation principles also apply to saunas and cold plunges if you plan to claim them for medical purposes.

3. File Your Taxes Correctly

When filing your taxes, ensure you follow these steps:

• Itemize your deductions on Schedule A of Form 1040.
• Include the hot tub costs in the "Medical and Dental Expenses" section.
• Confirm that your total medical expenses exceed 7.5% of your (AGI). Only the portion of expenditures above that threshold qualifies for the deduction. Consult with a tax professional to ensure you claim your deduction correctly for complex situations. 

Documentation Needed for a Hot Tub Tax Deduction

The IRS requires clear and well-organized proof that the hot tub is primarily used for medical treatment, not general wellness or relaxation. Here's a more detailed breakdown of the documentation you need:

Doctor's Prescription

A prescription from a licensed physician is the cornerstone of your claim. The prescription must meet specific requirements to ensure it meets the IRS guidelines:

• Medical diagnosis: The prescription should clearly state your specific medical condition (e.g., arthritis, fibromyalgia, chronic back pain) that the hot tub is intended to treat.
• Treatment justification: The prescription must explain how the hot tub will directly treat your condition (e.g., through hydrotherapy for pain management, muscle relaxation, or improved circulation).
• Recommended usage: The prescription should also include the suggested frequency and duration of hot tub usage (e.g., daily use for 30 minutes for pain relief).

If applicable, keep supporting medical records such as X-rays, MRI scans, and EMG reports to support your claim. 

1. Receipts and Proof of Purchase

• Purchase receipt: The original receipt for the hot tub includes the cost, make, model, and date of purchase.
• Installation costs: If the hot tub requires installation, keep your contractor's itemized list of the expenses. This can include any necessary electrical work, plumbing, or site preparation.
• Ongoing maintenance receipts: Save any maintenance, service, or repair receipts. These can include costs for water treatments, cleaning, and general upkeep directly related to medical use.

2. Usage Logs

To further substantiate the medical use of the hot tub, maintain a detailed log of your hot tub usage. This log should include:

Dates and duration: Note when you used the hot tub and for how long.

Medical purpose: Document the specific health benefits you experienced during each session, such as relief from muscle pain or improved mobility.

These logs indicate that the hot tub is primarily used for medical purposes. Be consistent and thorough in tracking your usage to show that it aligns with your doctor's prescription.

3. Supporting Evidence for IRS Audits

If your hot tub deduction is ever audited by the IRS, being prepared with comprehensive supporting evidence is vital. You should compile:

• Written recommendations: A recommendation that discusses the hot tub's role in your treatment plan can strengthen your case, in addition to the doctor's prescription.
• Detailed medical history: Record your medical condition, treatment history, and how the hot tub fits into your treatment plan.
• Before and after assessments: Include any assessments showing improvement before and after using the hot tub, such as progress reports from your doctor or physical therapist.
• Hydrotherapy literature: If available, include studies or medical literature supporting the use of hydrotherapy for your condition.
• Logs of medical use: Make sure your usage logs are current and reflect your consistent use of the hot tub for medical purposes, supporting your claim of necessity.

Common Mistakes to Avoid When Claiming a Hot Tub Deduction

1. Misclassifying the hot tub: Ensure the hot tub is classified as a medical expense rather than a general wellness feature. The IRS only allows deductions for medically necessary equipment.
2. Failure to meet medical necessity: A doctor's prescription is essential. With a clear and detailed prescription outlining the medical need for the hot tub, you can claim it as a medical expense.
3. Ignoring documentation: Lack of proper documentation, such as receipts, usage logs, and supporting medical records, can jeopardize your claim.
4. Not meeting the AGI threshold: Medical expenses must be at most 7.5% of your adjusted gross income (AGI) to be deductible. Ensure you track all related expenses to meet this requirement.
5. Overlooking property value increase: If the hot tub increases your home's value, only the portion of the cost that exceeds this increase is deductible.

Potential Tax Savings

A hot tub tax deduction can lower your taxable income, saving you money depending on your tax bracket. For instance, if your AGI is $100,000 and medical expenses total $20,000, you could deduct $12,500. However, you can't claim that portion if insurance reimburses hot tub costs. Also, while a hot tub may increase your property value, only the medical-related costs are deductible. Likewise, if you receive reimbursement for saunas or cold plunges through health insurance or if they contribute to your home's resale value, only the medical-use costs are deductible. Consult a tax professional to navigate the process and ensure you adhere to the correct guidelines. 

Additional Savings with FSA or HSA Accounts

For further tax savings, some customers can use their FSA or HSA funds to purchase wellness products like hot tubs, saunas, or cold plunges. Since you've already set aside this tax-free money for medical expenses, it reduces out-of-pocket costs. It may complement the deductions you claim on your tax return. Check with your account provider to confirm eligibility.

Depreciation and Resale Value

Hot tubs generally depreciate over time. You may claim depreciation if you are using the hot tub for business purposes (like a home office). For personal use, depreciation is usually not applicable. Regarding resale value, a hot tub could make your home more appealing. Still, it may not significantly increase the property's value. The deductible is limited if the hot tub raises your home's value.

Similarly, the resale of saunas or cold plunges may increase your property's appeal. However, it typically allows for a tax deduction if you've tied them to medical necessity.

Frequently Asked Questions

Can a hot tub be tax-deductible?

Yes, a hot tub can be tax-deductible if it is medically necessary and prescribed by a doctor. The costs exceed 7.5% of your adjusted gross income.

What medical conditions qualify for a hot tub tax deduction?

Conditions like arthritis, fibromyalgia, and chronic pain may qualify if a doctor prescribes the hot tub as a necessary treatment.

How do I document a hot tub as a medical expense?

Keep the doctor's prescription, receipts for the purchase, installation, and maintenance, along with a log of usage for medical purposes.

Can I claim the entire cost of the hot tub as a tax deduction?

If the hot tub raises the value of your home, only the portion of the cost that exceeds the increase in your home's property value is deductible.

How do I claim a hot tub tax deduction on my tax return?

Itemize deductions on Schedule A of Form 1040 and include all related expenses under "Medical and Dental Expenses."

Is a hot tub an asset?

Yes, a hot tub is considered a personal property asset. If the home's value increases, it may also be classified as a capital asset.

What is the depreciation life of a hot tub?

For tax purposes, a hot tub's depreciation life is typically 5 to 7 years, depending on its use and classification.