Real Estate Investor · Portland, OR · Member since 2012 · 70 posts · 26 votes
Can an s-corp owner /employee /officer claim an amount attributable to his own labor on a flip to help bring down the taxable profit?
For instance, if he did a portion of the work - perhaps the tile, some painting, cleanup, etc - can he say it's worth $X amount based on what a sub would charge? And then deduct it an an expense ?
I agree with Jon. If you are the sole owner of the s-corp, then it all gets rolled into your individual return anyway. If you do take a decuction make sure you actually pay yourself fair and reasonable compensation, with support.
But remember, if you pay yourself out of your s-corp for work done, you'll get the deduction, but since you will be taxed more personally on the income than you would have been by not taking the deduction and leaving it in the business, you'll actually lose money doing it is way.
Can an s-corp owner /employee /officer claim an amount attributable to his own labor on a flip to help bring down the taxable profit?
... And then deduct it an an expense ?
Absolutely. S-corp officers are required to pay themselves a reasonable salary. The IRS would love to see you pay all profits out as Salary. Your only required though to take out a reasonable salary.
You don't want to forget though that an S-corp is a pass through entity. Taxes are not paid at the corporate level like they would be if this was a C-corp.
Net income from the S-corp will show up as income on your K-1. Salaries paid out will show up as W-2 wages with income tax withheld and all necessary payroll taxes.