How Cost Segregation for Swimming Pools Can Maximize Tax Savings and Boost Property ROI

When considering enhancements to your property, swimming pools often top the list of luxury additions. Beyond adding aesthetic appeal and functionality, they can offer substantial tax benefits when approached strategically through cost segregation. In this article, we discuss how swimming pools can unlock tax savings for property owners, particularly investors and businesses.

Core Highlights

• Swimming pools are categorized as land improvements, can qualify for a 15-year depreciation schedule.
• Property owners can leverage 100% bonus depreciation for eligible pool components, enabling significant first-year tax deductions.
• Pools increase property value, attract tenants or customers, and support premium pricing.
• Work with cost segregation and tax professionals to implement findings and claim deductions effectively.

Table of Contents

• Core Highlights
• Maximizing ROI Through Swimming Pools
• How Swimming Pools Qualify for Accelerated Depreciation
• Key Benefits of Accelerating Depreciation for Swimming Pools
• Conducting a Cost Segregation Study for Swimming Pools
• Example of Pool-Related Tax Savings
• Final Thoughts

Maximizing ROI Through Swimming Pools

Swimming pools are more than just recreational features—they are valuable property enhancements that can yield significant tax savings when integrated into a cost segregation strategy. By identifying pools as shorter-lived assets, property owners can accelerate depreciation and reduce their tax liabilities.

How Swimming Pools Qualify for Accelerated Depreciation

Swimming pools may qualify for faster depreciation under specific circumstances:

1. Land Improvements: Pools, including associated decking, plumbing, and filtration systems, are often categorized as land improvements, qualifying for a 15-year depreciation schedule.
2. Commercial Use: Pools installed at hotels, resorts, apartment complexes, and fitness centers often benefit from accelerated depreciation.
3. Business Use: Pools used for therapeutic services, swim schools, or other business purposes can also qualify for shorter depreciation periods.

Key Benefits of Accelerating Depreciation for Swimming Pools

1. Increased Property Value: Swimming pools enhance property appeal, attract tenants or guests, and support premium pricing for rentals or sales.
2. Immediate Tax Relief: Accelerated depreciation allows property owners to reduce taxable income significantly in the early years of ownership.
3. Eligibility for Bonus Depreciation: Under current tax laws, eligible components of swimming pools can qualify for 100% bonus depreciation, enabling full deduction in the year of installation.

Conducting a Cost Segregation Study for Swimming Pools

A cost segregation study evaluates the specific components of a swimming pool to identify those eligible for shorter depreciation periods. Here are the steps to get started:

1. Engage a Specialist: A cost segregation expert will analyze the pool's features, including pumps, heaters, lighting, and surrounding landscaping, to determine eligibility for accelerated depreciation.
2. Categorize Pool Components: Elements such as plumbing, filtration systems, and decorative features are assigned appropriate depreciation schedules based on IRS guidelines.
3. Apply Tax Deductions: Work with a tax professional to implement the study findings into your tax filings for maximum benefits.

Example of Pool-Related Tax Savings

Consider a $200,000 investment in a swimming pool for a commercial property. A cost segregation study identifies $150,000 of the cost as qualifying for 15-year depreciation. If eligible for 100% bonus depreciation, the property owner could deduct the entire $150,000 in the first year, substantially reducing taxable income and improving cash flow.

Final Thoughts

Swimming pools are not only an attractive feature but also a strategic investment when paired with cost segregation. By leveraging this tax strategy, property owners can enjoy both aesthetic and financial benefits. Whether the pool is part of a commercial property, a residential rental, or a business operation, conducting a cost segregation study can help you unlock significant tax savings.

Ready to explore the financial advantages of your swimming pool? Contact a cost segregation specialist today to learn how this valuable asset can contribute to your property’s success!