repairs

8 Replies

hello all . i think this is a tax question .  i can do 99% of all my own repairs but my labor is not deductible on taxes . so i want to hire out for repairs up to the point were it starts costing me income. does anyone have a quick way to determine that magic number ? 

Your question, while no doubt sincere, doesn't make sense.

Here is the deal:  (for working on one of my rentals) A basic example excluding other factors such as overhead and depreciation.

Rent for November        $500.00

if I fix the toilet. 0 money spent for labor, $75 for new toilet.   

Net taxable income $425.00    federal tax at 15% 63.75     Net to me to keep $361.25

If I hire a plumber

$128 labor

$150 for toilet

so:

Rent $500

Plumbing bill $278

Net taxable income $222.00     federal tax 33.30    Net to me to keep $188.70

If I hire out the labor, I would pay less taxes, but the fact is still the same, whatever I pay for labor comes out of my pocket. 

It would help if you would sit down with an accountant and have them explain how income, expenses, non-cash expenses, and taxes work. 

PS I am like you in that I like to do all the work, so I can and keep all the money. Almost the only time I call a plumber is when the sewer is backed up.

ok so it goes ....income -deductions = tax able income ? i know there lots of variables ,but is this correct ? this makes sense but some how i had it in my head that it went....... income -  % for tax = x - deductions then whats left of x pay in . 

this just made my life harder . 

Don't forget that property insurance, mortgage interest, depreciation, management/legal fees, utilities, advertising, auto/travel expenses, and real estate taxes are also deductible.

There are a lot of websites that walk you through your taxes and take the pain out of it.

I use express1040.com.  It ends up being about $10-20 to e-file both your state and federal return.

Jason,

spend 30 minutes with an accountant. get a simple education. It is not that hard.

From a simple math standpoint, if you do something yourself and spend less on repairs, that would increase your profit.

But in practice, when investors try to do their own repairs, the project often drags out FOREVER. So they "save" a few bucks on labor but end up holding the house for 7 months instead of 3, paying insurance, utilities, hard money loans, etc. etc. while "saving" money on the repairs.

Some owners like doing their repairs simply to get eyes on the property to see what's going on inside.  Others do them because they enjoy doing the work.  In the end, it's not really a tax question because you doing the work is going to raise income and taxes theoretically.  I have a number of properties where the renters don't realize that I am the owner and I prefer it that way....I find out a ton more when I come out as the worker or manager than I would the owner.  I know that doesn't answer your question but I'd say do the repairs if you enjoy them and can handle the work correctly....otherwise, find a good reliable handyman in your market especially if you time is valuable.  Look at the time value of money....what else could you be doing more productively or what do you bill out hourly.  I had a surgeon client who insisted on cleaning his gutters...did so for years....his hourly had to be $10k.....until he fell off the ladder and broke his arm!  Now, HandyANDY cleans his gutters twice a year!

Thanks for all the info.  I don't know how I had the deduction wrong in my head. I've got it straight now.

No worries you have a ton of experienced folks here who will at least attempt to help set you in the right direction.  BP is a great place to network and make contacts!

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here