Rental Property Investor · Queensbury, NY · Member since 2019 · 2 posts · 1 vote
Hello, I am new to the rental property arena. Currently have one duplex with aspirations to buy more in the near future. To minimize expenses I am doing light jobs at the property. Snow removal, mowing, painting, etc. is it possible to "pay myself" for the duties and/ or the depreciation of my tools? Thanks in advance for any feedback!
You can certainly pay yourself for your labor. I think your question is whether or not there is a tax benefit to pay yourself. The answer to that is that there is no tax benefit because it will all be taxable income to you either way. For example, if you don't pay yourself then the rental property will generate more net income (because it didn't pay the cash to you as an expense) which will be taxable to you (assuming your property depreciation doesn't eliminate that as taxable income). Or you take it out as an expense and claim it as income. Now this is over simplified because It depends on how much of your net income is covered by depreciation and how much you have invested as owner equity. Ideally you would reach out to an accountant for advice specific to your situation.
Additionally, you don't want to depreciate your tools you want to expense them. Assuming they are under a certain amount (again, a good question for an accountant). For example, if you buy shovel for $50 you want to take it as an expense of $50 immediately. You don't want to depreciate that $50 over a several year period.
Yes, for paying yourself but it doesn't usually make sense to do so since you will also pay self employment tax on that income on top of the ordinary income tax you will pay. Keep in mind for self employment tax you pay the employers portion too. Add your location to your profile for more location specific advice. As for the tools/equipment read the IRS publication on business expenses, it should tell you how to handle the cost of tools and give you a primer before talking to an accountant.