Deducting the value of reduced rent for handyman

Deducting the value of reduced rent for handyman

New York City, NY · Member since 2015 · 125 posts · 48 votes

I have a two family house, with one unit given a discounted rent that's about $300 month below market rate.  In exchange, the guy in this unit acts a caretaker and general handyman for the property, and does tasks like lawn care, snow removal, and basic repair work.

Am I able to deduct this $300 from my taxes as a business expense?  My understanding is that if I charged him full rent, and simply paid him $300 every month for his services, that would be deductible, and at the end of the day, this works out to basically the same thing.

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Lance LvovskyPro Member
Accountant · Fort Lauderdale, FL · Member since 2013 · 1k+ posts · 753 votes
9y
You answered your own question. The alternative arrangement would be him paying you an additional $300 and you turning around and paying him $300/month for his services. Technically speaking, you are charging him reduced rent in exchange for his services. His services constitute income to you - in this case $300. So you would include the $300 as income but then just deduct it thereafter. You get to the same place.
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  • Natalie KolodijBusiness Member
    Moderator
    Tax Strategist| National Tax Educator| Accepting New Clients · Member since 2014 · 3k+ posts · 4k+ votes
    9y

    Yes you can deduct it as a service expense

    However you will have to issue him a 1099 and he will have to report the value as income to him. 

    There needs to be matching. If you're picking it an an expense, he needs to pick it up as income. 

  • Investor · Clifton, NJ · Member since 2017 · 53 posts · 54 votes
    9y
    Wouldn't not paying taxes on the $300/mo taxable income accomplish the same thing? So if the rent is lower, you're already not paying taxes on it? Is this too simple? Am I too simple?
  • Lance LvovskyPro Member
    Accountant · Fort Lauderdale, FL · Member since 2013 · 1k+ posts · 753 votes
    9y
    You answered your own question. The alternative arrangement would be him paying you an additional $300 and you turning around and paying him $300/month for his services. Technically speaking, you are charging him reduced rent in exchange for his services. His services constitute income to you - in this case $300. So you would include the $300 as income but then just deduct it thereafter. You get to the same place.
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