Capitalizing a shed

Forum|Forum|3 years ago
March 8, 2023
1 reply
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I asked this question in another forum, but I did not understand the answer. I'm hoping this forum may be more helpful.

I am set up as an S-Corp. I built a shed to store my tools in, for my business. I was careful to track the cost and the time it took me to build the shed. I was not taking a paycheck from the business at the time, so I am not clear if I should add the cost of my time to the asset to be capitalized since I wasn't actually paid. If I do need to add the cost, what account do I credit for the labor? Would it be the Member's Equity?

Also, one of my employees wired the shed for solar. I read a post that to capitalize the asset, I need to credit the accounts that hold the cost, which are labor and materials, and then debit the asset account, but I don't understand the labor piece? If I credit the labor account and debit the asset for that labor, my labor will not tie to my W2s or other tax filings related to labor. How do I do this?

Not A Product Question

JohnB5677

I built a shed to store my tools in, for my business. I was careful to track the cost and the time it took me to build the shed. I was not taking a paycheck from the business at the time, so I am not clear if I should add the cost of my time to the asset to be capitalized since I wasn't actually paid. If I do need to add the cost, what account do I credit for the labor? Would it be the Member's Equity?

No, you cannot deduct your labor as a business expense.

In the list of Non-deductible expenses Publication 529 (Top right of page 6) The value of wages never received or lost vacation time.

If this was one of your W-2 employees, the labor would be accounted for in his wages, no additional entry is necessary. You would then Capitalize the price of the installation.

Again, you cannot credit for your labor.

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