As a landlord, you are generally responsible for maintaining your rental property in a habitable condition and, in most cases, will be responsible for making needed repairs (except when the tenant causes the damage or malfunction).
As a result, landlords will shoulder the costs of such repairs. Now a landlord will often hire someone to perform those repairs and pay them, but if they are handy, they may choose to do the repairs themselves.
In this situation, the question arises as to whether a landlord could pay himself to do the repairs?
In this article, I am going to answer and provide some guidelines on how you can do this properly (including examples of state laws addressing this topic). I will also touch on tax implications around this type of activity.
If you have don’t have the time to read through it all, here’s a short answer to the question:
A landlord may perform repairs that go beyond normal wear and tear or that are caused by the tenant and charge the tenant for such repairs, provided that state and local laws permit this practice. In most cases where they do, the landlord must be competent and charge reasonable market rates.
Let’s get into it.
The information contained in this post is for informational purposes only. It is not legal advice. You should seek the advice of a qualified legal professional before making any decisions relating to the topics covered by this article.
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State Laws Regarding Landlords Performing Their Own Repairs and Paying Themselves
As mentioned earlier, if a landlord is intending to pay himself for repairs that he performs, he should comply with applicable laws relating to this activity.
The good news is that at least a few states seems to support this practice.
In California, if the repair is to fix damages that go beyond ordinary wear and tear and the landlord is qualified to do the repair, they may do so and charge the tenant the same as if a contractor had performed the work. Source.
Similar rules seem to apply in other jurisdictions.
For example, Illinois’ Security Deposit Return Act provides that the landlord may include the reasonable costs of his or her labor to repair or replace damage or damaged items caused by the tenant. Source.
Of course, other jurisdictions may have opposing laws, depending on how tenant-friendly they are. The rationale would be that a landlord may be incompetent and make poor repairs, while still charging a tenant full freight.
Bottom line is that you should consult with your lawyer (or at least review your state’s landlord tenant or security deposit laws) to get a definitive answer.
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Tax Implications to Doing This
It is important to note that there are also tax implications here. Again, I am no tax expert, so you should definitely consult with your accountant, but here are some general principles I have found on the topic.
Under the tax code, “ordinary and necessary” expenses for maintaining the property can be deducted from rental income on the landlord’s tax return. Typical examples of this include repairs to plumbing systems, heating and air conditioning systems, electrical systems, and other types of routine maintenance.
If the landlord is performing the repairs themselves, they can deduct the cost of any materials and supplies they purchase for the job, as well as any tools or equipment they need to complete the work.
They cannot, however, deduct the value of their own time or labor.
It is important for landlords to keep careful records of all repairs and related expenses, including receipts and invoices, in order to accurately calculate their deductions and avoid any potential tax issues.
It is recommended to consult with a tax professional or accountant for specific advice on their individual tax situation.
Conclusion
So there you have it – an answer to whether a landlord may pay himself for repairs he performed at his rentals. Hope this has been helpful and happy landlording!