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What is Arizona’s Owner-Builder Statute?

Posted by Brandon Keim | Sep 13, 2024 | 0 Comments

Arizona requires all contractors to be licensed through the state. There are some exceptions to this rule, however, including the owner-builder exemption.

In some situations, property owners aren't required to get a license for work done on their buildings. Arizona has specific requirements for this exception, and owners should also be aware that there are still potential tax implications.

Qualifying as an Owner-Builder

Property owners don't need a contractor license when they're doing work on their own property and:

  • They complete the work themselves OR
  • They do the work with employees OR
  •         They complete the work with licensed contractors

The work done can include constructing, altering, repairing, improving, or remodeling a building that they own.

The building in question will either be occupied or used solely by the owner. If a building is intended to be occupied or used by a third party, such as employees, business visitors, or general members of the public, an owner must have a contractor license before completing the work.

In addition, the property cannot be put up for sale and rent within one year of completing the work. This includes any form of compensation, not just a financial exchange.

Tax Implications

That an owner doesn't have to secure a contractor license for a construction project doesn't exempt them from other federal or state laws. This includes any tax implications related to a construction project.

The statute specifically states employees of an owner and doesn't mention independent contractors or other freelance workers. This means that an owner must follow employment and tax laws while the work is performed.

Owners may have to deduct social security and federal income taxes from employees' checks or pay into unemployment. They may need to withhold other taxes or file quarterly or annual reports.

If you're an owner who falls under the owner-builder exemption, you still must follow other laws. Failing to follow tax law can result in serious financial repercussions.

If you need help, call Senior Partner, Tax Controversy Attorney, and former IRS attorney Brandon A. Keim at (602) 200-7399 or contact him online to discuss your options.

About the Author

Brandon Keim

A Certified Tax Law Specialist, CPA, partner at Frazer Ryan Goldberg & Arnold LLP, and former Senior IRS Trial Attorney, Brandon Keim holds an LL.M. in Taxation from Georgetown University Law Center.

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