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Pool Taxes – Does an Inground Pool Increase Property Taxes?

Pool Taxes – Does an Inground Pool Increase Property Taxes?

Pool TaxesWhile there are no direct pool taxes, an inground pool increases a property’s value In turn, this indirectly raises property taxes and insurance rates.

In-ground pools tend to enhance property values, which in turn raises property taxes. The type of swimming pool you have as well as its current condition have an impact on the overall worth of your house. Moreover, in-ground pools frequently necessitate higher insurance coverage limits, which raises homeowner’s insurance prices. Additionally, the expense of an in-ground pool raises your property’s basis.  This may increase your taxable gain when you sell the home.

Many experts believe that having a well-kept pool can increase the market value of your home. Pools are especially desirable in areas where they may be utilized all year. In fact, if most of your neighbors have pools but you don’t, it may reduce the value of your home on the market. However, if you reside in a normal neighborhood where some houses have pools but most do not, having a pool built will most likely have limited effect on the value of your home.

How Much Does an Inground Pool Cost to Install?

The cost of an inground pool varies depending on its material, shape, and size. According to a feature in Forbes Advisor, an inground pool costs between $28,000 and $55,000, or $50 and $125 per square foot. That works out to an average cost of $35,000.

The cost to install an inground pool is $35,000 on average and can range from $28,000 to $55,000 and sometimes upwards of $65,000 for special customizations and extra features. An added hot tub, for example, will cost $6,000 to $15,000 and pool lighting will be another $700 to $1,800. You can either choose to purchase a package from a pool supplier, which can include everything from excavation to decking, or go the DIY route. Turn-key packages for inground pools cost between $35,000 and $100,000. You can save thousands of dollars by doing some or all of the installation yourself, but only if you are experienced. For an inground pool installation, you will need to pay for the pool’s shell, rental equipment including a crane, excavation, water, backfill material, plumbing and pool equipment. That adds up to tens of thousands of dollars in some cases. (Source: forbes.com)

No two pool projects are alike.  Construction and installation costs are determined by a number of factors.  For example, the state where you reside, the topography of your property, and the specifications of your pool. Pool construction is often less expensive in warmer-weather states.  In warmer climates, residential pools are more common and supplies and contractors are more abundant. According to HomeAdvisor, those who live in more temperate climates pay around a 20% premium for pool construction.

What is the cost to maintain a pool?

Pool maintenance and repair are not cheap. According to HomeAdvisor, the typical annual cost for simple pool maintenance is $500 to $4,000. Then, you need to factor in repairs and utility expenditures such as water and, if you use a pool heater, utility costs. All told, The yearly total can range from $2,500 to $7,000. Normal upkeep involves purchasing and applying chemicals to maintain proper pH levels and prevent algae growth.  Also, having the pool vacuumed and cleaned on a regular basis throughout the swimming season.  Additionally, there are cleaning accessories to consider.  For example, telescoping poles, attachable brushes, and leaf skimmers will be required for upkeep.

These recurring costs have generally been one of the key factors that has diminishes a pools’ appeal. However, instead of employing a pool service, homeowners can dramatically reduce their expenditures by performing some of the upkeep themselves.

Property Taxes Vs Pool Taxes

An in-ground pool will almost certainly result in a reassessment of a home’s value.  As a result, it will potentially increase the annual property tax payment. The exact process differs by state and county.  However, most jurisdictions will reassess the value of a home at certain trigger events.  For example, when it is built when it is resold.  Also, when renovations such as adding an in-ground pool are completed. The amount a property bill will increase depends on the assessor’s calculation of the new property value.  Also, the property tax rates in a particular jurisdiction. According to U.S. News & World Report, an in-ground pool can enhance the value of your home by 6 to 11 percent.

Homeowner’s Insurance Versus Pool Taxes

An in-ground pool, like property taxes, can raise your homeowner’s insurance costs. The reality is you might be held personally accountable for damages if someone goes into your backyard and injures himself or drowns in your pool. To protect yourself, you’ll probably want to boost your homeowner’s insurance coverage.  Ultimately, this means paying higher premiums. To reduce these dangers, insurance firms often require surrounding pools with a four-foot-high fence.  Also, having locking gates leading to the pool area.

Insurance considerations

Most homeowner’s insurance plans cover up to 10% of the cost of replacing external buildings or fixtures such as a pool.  They also cover most swimming pool accidents at least partially. However, even if the liability section of your homeowner’s insurance covers pool accidents if a guest is wounded or killed, you can still be held legally liable.  For example, if you were negligent or if you did not provide a safe swimming environment when you allowed guests to use your pool. If your insurer deems the pool to be an external structure, you must include it on your insurance. Most rules and local laws require you to erect a fence around the pool and remove any diving boards.

Also, it may also be smart to pay for a personal umbrella policy that gives liability protection beyond the limits of your homeowner’s policy. According to the National Safety Council, more than 3,700 people drowned in the United States in 2016.

Swimming pool injuries can happen at any time. Swimming pool falls are one of the more common ways people are injured, which are often caused by too-slick surfaces. Malfunctioning swimming pool ladders and defective diving boards can also result in a swimming pool injury. When someone injures themselves in or around a pool area, they can potentially experience scrapes and cuts, broken bones, head injuries, back injuries, and neck injuries.  (Source: poolsafetyfoundation.org)

Tax Basis in the Home

When you make upgrades and additions to a home, you increase your stake in the property. When you sell a property, your basis determines the amount of gain or loss you suffer for tax reasons. Depending on the sale price, installing an in-ground pool may increase the taxes paid when you sell your house. For example, if you add a pool for $40,000 and then sell the house for $60,000 more, your profit is $20,000. There is no gain if the pool installation has no effect on the value of your home.

Taxes Paid on Home Sale

Building an in-ground pool may or may not affect your overall tax burden. Homeowners can exclude the first $250,000 of gain on the sale of their properties but cannot deduct any losses. However, owners of investment and rental properties pay taxes on their gains.  But, they receive a tax rebate on their losses. Increased benefit from a new pool equals a greater tax bill for these taxpayers.

If you have a capital gain from the sale of your main home, you may qualify to exclude up to $250,000 of that gain from your income, or up to $500,000 of that gain if you file a joint return with your spouse. (Source: irs.gov)

The Bottom Line on Pool Taxes and Home Value

Before you commit to a swimming pool, make sure you understand what you’re getting into. Maintenance, repairs, and insurance can all be expensive. Of course, it can bring a lot of fun for a family, but as an investment, it’s a risky bet. There is no assurance that the pool will increase the value of your house or that it will even cover the cost of installation. You should also consider how you will prepare and promote your property and swimming pool when it comes time to sell.

Up Next: What Is an Unrecaptured Section 1250 Gain?

Unrecaptured Section 1250 GainAn unrecaptured Section 1250 gain occurs when selling real estate for financial gain after claiming depreciation tax breaks in previous years. Section 1250 is part of the Internal Revenue Service (IRS) tax code.  It allows previously recognized depreciation to be reclaimed as income.  This happens when you realize a gain on the sale of depreciable real estate property. Specifically, the profit you get after selling a Section 1231 asset for which you previously claimed depreciation tax. As of 2019, unrecaptured section 1250 gains are taxed at a maximum of 25%, or less in some situations. Section 1250 only applies to real properties, such as buildings and land. Unrecaptured section 1250 gains are calculated on a worksheet included with the Schedule D instructions.  These are reported on Schedule D and carried through to the taxpayer’s 1040.

 

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