This pool deductibility question is a standard example in any college income tax fundamentals textbook.

Let’s define “writing off the pool”. The interest related to the acquistion debt, whether in the form of mortgate debt or a HELOC, would generally be deductible.

In the case where a homeowner wants to deduct the costs TG mentioned, i.e., chemicals, cleaning, electricity etc, if a medical condition exist such as (let’s say) ALS in which swim therapy in a heated pool would alleviate the symptoms, those costs would generally be deductible on Schedule A to the extent that they exceed 7.5% of AGI, but only if the pool was specifically designed to meet the medical hydrotherapy needs as prescribed by a physician.

Let’s assume a homeowner arbitrarily deducts the same maintenance costs because he/she installs a pool due to something like “arthritis”, and there is no clear and urgent medical diagnosis and the pool is a standard backyard pool with diving board, slide and the usual configuration. The excess medical deductions will most probably trigger at least an IRS office audit and it will be imcumbent on the taxpayer to defend the tax treatment of the deductions, which will generally be disallowed and the taxpayer will be assessed an underpayment penalty and interest and perhaps a negligence penalty.

TG, be careful about the deductibility of anything in a HELOC or refi. The non-acquistion home equity debt interest cannot be deducted on the portion that exceeds $100,000. For example, if you HELOC your house to $130K and build an addition, that is acquisiton debt and is entirely deductible. But if you HELOC your house to $130K and buy jet skis, a lifted Ford F250, a Crystal Symphony cruise, and finance a bat mitzvah, the maximum interest deduction is allowed only on $100,000 of the debt. The remaining interest on $30,000 is disallowed.

When consumer interest was disallowed in 1991, there was a change in tax law that redefined consumer interest and instead of being phased out, it was merely redefined and shifted to deductibility as qualifed residence interest, and this led to the proliferation of HELOCS, which brings us to the mess we are today.