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    Mathandler1's Avatar
    Mathandler1 Posts: 87, Reputation: 2
    Junior Member
    		  
    #1

    Aug 28, 2007, 10:44 AM
    After Tax Economic Loss or Gain
    I have a hypothectical question here. If I am in the 33% margin tax bracket and on a particlular day I wanted to paint a room in my house. Becausse I have to work, it may be necessary to hire a outside painter. Now, if I am working and have to pay for a painter to come in to paint the room. Would this be considered a after tax economic gain or loss. Here is some hypothectical figures.
    Would it be an economic loss or gain if my employer pays me $200 and I $120 in labor? Would it be a gain if my employer paid me $180 for the day and I paid the $140 in labor? Would it be a loss if my employer paid me $100 for the day and I paid the $100 in labor? Or would it be none of these and would be something else. Thanks!
    ebaines's Avatar
    ebaines Posts: 12,131, Reputation: 1307
    Expert
    		  
    #2

    Aug 28, 2007, 11:21 AM
    You simply need to compare the after tax income of your wages versus the cost to you for the painter's labor. If you are in a 33% marginal tax bracket, then its beneficial for you to hire the painter rather than do it yourself as long as the cost of the painter is less than 2/3 your pay rate. In your first example, you earn $200, which means you keep 2/3 of that after tax, or $134, and then you pay the painter $120, netting you $14. The alternative of not going to work and not incurring the painter's cost nets you $0. So in this case you come out $14 ahead by going to work and hiring the painter. I think you can see that with the numbers you gave in the other two examples you'd be better off staying home and doing the painting yourself.
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,836, Reputation: 846
    Senior Tax Expert
    		  
    #3

    Aug 29, 2007, 08:16 AM
    Ebaines' analysis is pretty thorough, though there ARE other considerations, like how well the paint job is done, can you deduct the cost of paying someone (possible if you have a home office), etc.
    Mathandler1's Avatar
    Mathandler1 Posts: 87, Reputation: 2
    Junior Member
    		  
    #4

    Aug 29, 2007, 02:11 PM
    Scenario. Thanks. Can I deduct if the paint job is not good and have to pay someone else to come in and redo it? Can I deduct this as well?
    AtlantaTaxExpert's Avatar
    AtlantaTaxExpert Posts: 21,836, Reputation: 846
    Senior Tax Expert
    		  
    #5

    Aug 29, 2007, 05:13 PM
    Yes opn the re-do!
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