Discount for paying Cash to contractor?
Hi, I am in the home stretch of kitchen/bath renovation. Contractor is doing excellent work. Not worried about him walking off the job and job is on schedule. All has been legit. I have been paying installments by check. There are 3 installments left for a total of about $15,000. last installment is due upon…
Hi,
I am in the home stretch of kitchen/bath renovation. Contractor is doing excellent work. Not worried about him walking off the job and job is on schedule. All has been legit.
I have been paying installments by check. There are 3 installments left for a total of about $15,000. last installment is due upon the jobs completion. I asked the contractor if we payed each of the last 3 installments in cash if they’d give us a better price for those 3 and he said he’d let us know in a day or so. If he agrees what should I expect the discount to be for the remaining $15,000? I’m not sure what to expect and what is fair. Any suggestions?
Thank you.
A kitchen and bathroom renovation is considered a capital improvement rather than a maintenance repair. From my understanding(you can confirm this with department of finance) you should not be charged sales tax on any capital improvements. A repair or maintenance item will be charge sales tax(painting, fixing a leak, repairing a boiler, you get the point).
One way to save some of the taxes is to ask the contractor to file a “Certificate of Capital Improvement”. This will make the improvement exempt from paying sales tax on the labor.
The contractor files it with the state…be sure to get a copy and an itemized bill showing the sales tax so you know what you are paying for, or not paying for.
If you don’t, they can charge you the 8~%, file the form and then keep 4% that they save in the sales tax.
would you share the name of your contractor?
If you don’t get a receipt for the payment, then you don’t get to write it off against your profits whenever you sell the house someday. Which is not a problem if you don’t make more than $500,000 profit (the max that’s not taxed for a married couple) but if the profit is more than that then you’ll want your write-offs. Especially for the bigger renovation payments like this. We have this dilemma too. We have a handyman and a plumber both, who do cash jobs at a big discount. But although we might save thousands of dollars with these guys, we also don’t get to write off the thousands we paid them, whenever we sell our house.
Indeed $1256 is a lot of money to me and I am happy to say I’ll have it to put towards clothing and school supplies for my 3 children as I have worked things out to pay the remainder in cash and get the discount. If this contractor wasn’t close with friends of mine I might have hesitated, but this will work out well. Thanks for all the suggestions.
“You’re so cheap you want to save 8.375%?”
i don’t get it, why wouldn’t they? that’s $1256.
why would that make them cheap?
if the contractor doesn’t want to pay his taxes, i don’t see why that’s the OP’s concern. if that deal is offered, he should take it, and ignore the advice from the snobby goodie goodies who post here.
i guess everyone has so much money now that only “cheap” people would want to save $1256. give me a break.
You’re so cheap you want to save 8.375%?
I paid cash for a $9,000 project and got a signed receipt from the contractor.
I wouldn’t pay in cash. Also, I think you can deduct some home improvement from your taxes.