Sweat Equity

If you are a licensed contractor (and the homeowner), can you build the addition yourself and somehow "pay" yourself?


Hi Kim,

I get this question frequently. No lender will allow you to pay yourself, only materials and subcontractor labor.

If you don’t need a loan and are using your own money, it would make no sense to take your savings, pay yourself, and then have to pay taxes on what would then be considered earnings.

You will “earn” your “pay” in the form of “sweat” equity, when the addition is finished.

You could of course then borrow money against that equity, or sell the house and realize that equity as “real” money (profit).

Consult with a tax expert if you do sell the house as to what to do with that “profit”.

Carl Helmann