Pool, Spa, Outdoor Kitchen: How Features Change Your Cost-Seg Estimate

How in-ground pools, spas, outdoor kitchens, and decks land in the 15-year land improvement bucket, with worked examples and the percentages the calculator applies.

Pool, Spa, Outdoor Kitchen: How Features Change Your Cost-Seg Estimate

This tutorial covers a single mechanic: how outdoor improvements move basis from the 27.5-year (or 39-year) building shell into the 15-year land improvement bucket under IRC §168(e)(3)(E)(iv) and Pub 946 Asset Class 00.3. A pool, a spa, an outdoor kitchen, a paver patio, a wood deck — none of these are part of the building. They are land improvements. The calculator's pool_outdoor field captures them as percentage bumps to the 15-year bucket.

The 15-year asset class and why it matters

IRC §168(e)(3)(E)(iv) classifies "qualified improvement property" and certain land improvements as 15-year MACRS property with a 150% declining balance method (Pub 946 Table A-1, third column). Land improvements — which Pub 946 Asset Class 00.3 defines as "depreciable improvements made directly to or added to land, whether such improvements are §1245 or §1250 property, including sidewalks, roads, canals, waterways, drainage facilities, sewers, wharves and docks, bridges, fences, landscaping, shrubbery, and radio and television transmitting towers" — sit squarely in this class.

Three things make 15-year property attractive in a cost-seg context:

1. 1. It accepts bonus depreciation under IRC §168(k). Currently 100% under OBBBA.
2. 2. The 150% DB MACRS schedule on the post-bonus remainder front-loads more deduction than the 27.5-year SL building schedule.
3. 3. It is §1245 personal-property-treatment for recapture purposes — which matters on disposition (see the recapture warning below).

Without cost segregation, an in-ground pool sitting on a residential rental tends to ride the 27.5-year building schedule by default — losing roughly 8 years of accelerated depreciation that a study would unlock.

What the calculator's pool_outdoor field does

The questionnaire collects outdoor features as a list. Each item maps to a percentage bump on the 15-year bucket, defined in FEATURE_ADJUSTMENTS in cost_seg/constants.py:

• pool-inground → +3.0% on the 15-year class
• pool-above → +1.0%
• spa → +1.0%
• outdoor-kitchen → +1.0%
• patio-concrete → +0.5%
• patio-pavers → +0.8%
• deck-wood → +0.5%
• deck-composite → +0.8%
• pergola → +0.5%

The base 15-year allocation for an LTR is 7%; for an STR it is 8%. Adding a pool, a spa, and an outdoor kitchen pushes the LTR 15-year bucket to roughly 7% + 3% + 1% + 1% = 12% of basis. There is a 50% total-reclassification cap in the engine to prevent run-away stacking, but a normal residential rental will not approach it.

Worked example — STR with pool, spa, outdoor kitchen

A property owner buys a Hill Country short-term rental in April 2026 for $750,000 with $130,000 allocated to land, leaving $620,000 of depreciable basis. The property has an in-ground pool, an attached spa, and an outdoor kitchen on a paver patio — entered as pool_outdoor=pool-inground,spa,outdoor-kitchen,patio-pavers.

Base STR 15-year allocation: 8%. With the four features:

• Pool (in-ground): +3.0%
• Spa: +1.0%
• Outdoor kitchen: +1.0%
• Paver patio: +0.8%
• Total 15-year: 8% + 5.8% = 13.8%

Dollar amounts:

• 5-year (base 13%, no per-item bumps): $620,000 × 13% = $80,600
• 7-year (base 1%): $6,200
• 15-year (13.8%): $620,000 × 13.8% = $85,560
• 27.5-year building (72.2%): $447,640

At 100% bonus depreciation (OBBBA, 2026 acquisitions), the entire $172,360 of accelerable basis hits as a year-1 deduction. Add the partial-year mid-month building S/L (April placement, 8.5 months in service) of $447,640 / 27.5 × 8.5/12 ≈ $11,530 and the year-1 deduction lands around $184,000. At a 32% bracket, year-1 federal tax effect ≈ $58,800 — well above the $5,000 screening floor.

Without the outdoor features, the same property would allocate only $620,000 × 8% = $49,600 to the 15-year bucket, losing about $36,000 of accelerable basis. At 100% bonus and a 32% bracket, the outdoor features are doing roughly $11,500 of year-1 federal tax effect on this property.

Try the STR + pool + spa + outdoor kitchen estimate →

Above-ground pool, deck, and pergola

The percentages get smaller as the structure becomes lighter and more clearly removable. An above-ground pool sits on top of the existing site; it is a land improvement, but a less-permanent one than an in-ground pool, and the calculator allocates 1% rather than 3%. A wood deck is a 0.5% bump because the typical residential deck is a low-cost addition; a composite deck is 0.8% because composite materials carry a higher cost basis. A pergola is 0.5%.

These are starting points, not absolutes. A custom paver patio with built-in lighting and drainage is a meaningfully larger basis allocation than a poured concrete slab — an engineering study would reflect that. The screening calculator categoricals are intentionally coarse.

Recapture exposure on outdoor improvements

15-year land improvements are §1245 property for recapture purposes. Accumulated depreciation on a pool, spa, outdoor kitchen, etc. comes back as ordinary income on disposition under IRC §1245(a) — not the §1250 25% unrecaptured-cap-gain rate that applies to building shell. For a property owner planning to sell within 5 years, this is the second number to bring to a CPA conversation alongside the year-1 effect. The calculator surfaces a recapture warning automatically when planned_disposition is anything shorter than 5 years.

See an LTR with the same outdoor features →

Citations

• IRC §168(e)(3)(E)(iv) — 15-year MACRS for qualified improvement property.
• IRS Publication 946, Asset Class 00.3 — land improvements definition.
• IRS Publication 946, Table A-1 — 150% declining-balance, half-year convention for 15-year property.
• IRC §168(k)(6) — 100% bonus depreciation, OBBBA permanent.
• IRC §1245 — recapture of accelerated depreciation as ordinary income.

Disclaimer. This tutorial describes general federal tax concepts. TaxProtestTx (Nought Labs LLC) is a feasibility-screening tool, not tax advice or a cost segregation study. Calculator output cannot be relied on under Treasury Circular 230. Consult a qualified CPA, EA, or attorney before filing. Results are not guaranteed.