Proper way to pay renter that does some work?

Question

If a renter does some repairs or maintenance for you, can you deduct it from their rent on the books? Is this okay to do? Or, do you have to make them pay full rent and then pay them and 1099 them (assuming it is over the minimum)?

This would make their rent look erratic on the books, but would require less transactions and probably make the tax burden less on the renter? I am just not sure if it is okay to simply deduct it from the rent.

John Stevenson · Answer

I know the cons of using a renter for work, but I have one that is reliable and has been mowing grass for me for 10-15 years (lost track).

However, I am buying a new apartment where the current owner has an agreement with a tenant to "manage" the units. Mowing grass, turnover preps, & minor stuff. This will be terminated with my purchase, but I am wondering how I would pay him if I wanted to use him going forward. They currently have a contract with him for a set price per month off his rent. However, this is the current owners employee also (subdivision developer).

Anyway, it sounds like you all agree, pay and 1099, and try to avoid this. I would agree since I do not know this guy. This could create a problem with him paying his rent though. However, I may try him out on some little jobs and let him mow grass to see what happens...... but he will not like the 1099 I am sure :(

Kim Meredith Hampton · Answer

John,

I never let tenants do work on the property, been there, done that. I have them performed by

licensed and insured contractors that are uninterested third parties.

Matt K. · Answer

Pay them as you would a contractor, with quote/invoice and check matching said quote invoice. Keep in mind the more you rely on them as a contractor you are in essence providing their income to pay your rent so if your jobs stop the rent could stop too. Not saying it will happen, but rather it can happen.

Nicole A. · Answer

I know this isn't what you asked, but I would not have my tenant do repairs.

But if you insist, I would say that they pay rent as normal, and you pay them by the repair job as you would for any contractor you hire. I would also have each job spelled out in a contract. Keep it separate and keep it professional.