Taxes
The higher your tax bracket, the more you save by “home producing”. As an example, if you’re in the 50% combined tax bracket, the various tax authorites will take $50 for every $100 you earn. So, if you want to buy something for $100, you’ll have to earn $200 to allow for the 50% tax bite!
So, let’s say you’re thinking about adding a deck to the back of your house. A contractor gives you an estimate of $3,200 for materials and labor. You price the materials at $1,400 and decide to build it yourself – thinking that you’ll save $1,800.
But, considering the tax situation above, your actual cost for the deck, including taxes will be $6,400…and the cost of doing it yourself (with taxes) will be $2,800. So, you’ll be saving $3,600, when your taxes are taken into account. As a result, you’ll be saving additional money above and beyond the original $1,800 savings. Or, stated another way, your $1,800 savings is tax-free.
Many people don’t realize just how much their earning and buying power declines as they move into higher and higher tax brackets – all the more reason for becoming a producer rather than just a consumer.

Labor
As a home woodworker, you have two ways to look at labor costs. The first is to view it as compensating yourself for the time you’ve invested…versus the amount of money you’ve saved. This will give you a dollar-per-hour figure that you’re theoretically paying yourself for building a project.
The second is to look at your labor as being FREE, since you’re usually working in your spare time. This method tells you what percentage of your tools and machinery costs are being paid for out of your cost savings For example, your deck saved you $1,800 in tax-free labor. If it took you 60 hours to build, you can pay yourself $30 per hour, tax-free. Or, if you prefer to think of your labor time as FREE time, your savings of $1,800 can be viewed as having completely paid off your original $1,500 tool investment and made $300 in profit over the years.

Return on investment
Your return on investment is the profit you make on your investment. By comparing the percentage return of some common investments with a woodworking investment, some startling results are obtained.
Let’s say you decide to invest in a stock giving you dividends of 20% each year. You put your $1,500 in the stock market and your return on investment yields you $300. Now…let’s say you put your $1,500 in a long-term account at your bank that gives you 6% annual interest. At the end of the year, you will have earned just $90 on that account.
Now, let’s invest $3,200 in today’s dollars…in tools. You build your deck for $1,400 and your hutch for $1000 in materials costs. At the end of the year, you still have your $3,200 worth of tools…PLUS…your $2,000 hutch and your $3,200 deck. That’s a
total value of $8,400 … or … $2,800 OVER your original investment
of $5,600 ($3,200 in tools and $2,400 materials). This gives you a
return on investment of 50%.

Pretty tough to get these kinds of yields in the stock market…
plus, unless they’re in certain types of IRA accounts, you’ll have
to pay taxes on your yield. Not with woodworking … and that’s
just one more reason why woodworking makes such an excellent
investment !