Author Topic: What do you pay yourself for labor?  (Read 256 times)

rothwem

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What do you pay yourself for labor?
« on: May 15, 2019, 08:32:10 AM »
I've got a duplex rental property that I've been actively managing.  Its 250 miles away, but most stuff can be taken care of over the phone or the internet.  However, I've got a couple projects that I've DIY'ed that basically took the whole weekend each time I went there.  I obviously plan on deducting the cost of the materials and the miles driven, but how does deducting your own labor hours work?

In my W2 job, I make ~$45/hour (roughly based off of my salary), so that probably costs my workplace ~$75/hour?  Is that what I should tell the IRS I paid for labor cost?  Or should I say $100/hour, a nice round number?  How do I justify my hourly labor rate?

walkwalkwalk

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Re: What do you pay yourself for labor?
« Reply #1 on: May 15, 2019, 08:42:53 AM »
You don't want to do that. You would be needlessly paying Self Employment taxes on that income. You just report (potentially) more income on Schedule E (profit/loss from rental) from the savings of having done the work yourself.

rothwem

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Re: What do you pay yourself for labor?
« Reply #2 on: May 15, 2019, 08:53:01 AM »
You don't want to do that. You would be needlessly paying Self Employment taxes on that income. You just report (potentially) more income on Schedule E (profit/loss from rental) from the savings of having done the work yourself.

Ah.  Yeah that makes sense.  /thread

Enigma

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Re: What do you pay yourself for labor?
« Reply #3 on: May 15, 2019, 08:53:47 AM »
You don't want to do that. You would be needlessly paying Self Employment taxes on that income. You just report (potentially) more income on Schedule E (profit/loss from rental) from the savings of having done the work yourself.
I agree - I do not pay myself when I am making repairs and I have the benefit of getting paid later from increased profits in the property.   Last thing I want to do is have to keep up with a 1099, self employment tax, medicare/social security tax, etc

waltworks

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Re: What do you pay yourself for labor?
« Reply #4 on: May 15, 2019, 08:54:32 AM »
For tax purposes, zero.

For purposes of calculating your investment returns, whatever your weekend time is worth to you ($150 an hour is probably what I'd pick).

Self-managing can make a rental look *really* bad as an investment quick if you're DIYing and driving long distances to do it.

-W

Jon Bon

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Re: What do you pay yourself for labor?
« Reply #5 on: May 15, 2019, 11:30:24 AM »
For tax purposes, zero.

For purposes of calculating your investment returns, whatever your weekend time is worth to you ($150 an hour is probably what I'd pick).

Self-managing can make a rental look *really* bad as an investment quick if you're DIYing and driving long distances to do it.

-W

Well last year about $35,000.

I bet I work about <8 hours a week.  So about 80-100 bucks an hour.