Tax write off/deduction as landlord

[Bryan Payne]

Hey bigger pockets members! Just a quick question. I purchased my first rental property a little over a year ago in Massachusetts. It’s a three family and I do occupy one of the units. My question is: if I were to purchase a plow to plow the driveway and parking spaces, can I get any sort of tax benefit from it? I’m trying to figure out if it makes more sense to hire someone to do it or to make the jump and purchase the (very expensive) plow. Thanks in advance!

[Nathan Gesner]

First, you need to understand that tax deductions are not a dollar-for-dollar return. In other words, you could spend $3,000 on the equipment to get $1,000 in tax deductions. That' means $1,000 of your money is not taxed, not that you get $1,000 back in taxes. A simpler explanation is that you are wanting to spend dollars to save pennies.

Sit down with pencil and paper and do the math. You can't just buy a machine with a plow. You have to pay for gas, maintenance, and the time/hassle involved with getting up early and plowing in the bitter cold. Let's say your machine cost $3,000 and you can expect it to last for five years. It costs $300 a year in gas and maintenance. Let's say you spend ten hours a year plowing and your time is worth $30 an hour.

$3,000 / 5 years = $600 a year

Add $300 in maintenance and gas = $900

Add $300 for your time = $1,200

Meanwhile, you can hire someone else to do the job for $100 an hour. 

10 hours x $100 = $1,000 

According to this quick demonstration, it would be cheaper to hire someone else than to do it on your own. And I suspect you can hire someone for $50 - $60 an hour which would make your savings significantly more.