Can value from labor provided to oneself be taxed?
This is called imputed income, which is generally not taxed in the US. The basis of the home is the cost of land and material. That's it.  Your time isn't added to basis. No different than if you spend 1000 hours in a soup kitchen. You deduct miles for your car and expenses you can document but you can't deduct your time.  Over 2 years, you could have a gain up to $500K per married couple and pay no tax. I've heard of handyman type people making a living this way untaxed.  They move into a fixer-upper, fix it up while living there, stay over two years and sell.  They can pocket $125k/yr tax free this way assuming they produce that much value in their fixing-up.  (Beware, though, that this will bite you in low social security payments in retirement!)
"This kind of investment is called ""sweat equity"".  It is sometimes taken into account by lenders and other investors.  Such investors look at the alleged value of the input labor with a very skeptical eye, but they often appreciate that the entrepreneur has ""skin in the game"". The sort of analysis described by the original poster is useful for estimating ""economic profit"" -- how much better off was the entrepreneur than if he had done something else with his time.  But this sort of analysis is not applicable for tax purposes for most small businesses in the United States. It is usually not in the entrepreneur's interest to use this method of accounting for tax purposes, for three reasons: It requires setting up the business in such a way that it can pay him wages or salaries for his time.  The business might not have enough cash resources to do so.  Furthermore, setting up the business in this way requires legal and accounting expertise, which is expensive. If the entrepreneur does set up the business like this, the wages and salaries will be subject to tax.  Wage and salary tax rates are often much higher than capital gains tax rates, especially when one considers taxes like Social Security taxes, Medicare taxes, and Business & Occupation taxes. If the entrepreneur does set up the business like this, the taxes on the wages and salaries would be due long before the hoped-for sale of the company.  The sale of the company might never happen.  This results in a time-value-of-money penalty, an optionality penalty, and a risk penalty." "A mutual fund's return or yield has nothing to do with what you receive from the mutual fund. The annual percentage return is simply the percentage increase (or decrease!) of the value of one share of the mutual fund from January 1 till December 31. The cash value of any distributions (dividend income, short-term capital gains,  long-term capital gains) might be reported separately or might be included in the annual return.  What you receive from the mutual fund is the distributions which you have the option of taking in cash (and spending on whatever you like, or investing elsewhere) or of re-investing into the fund without ever actually touching the money. Regardless of whether you take a distribution as cash or re-invest it in the mutual fund, that amount is taxable income in most jurisdictions. In the US, long-term capital gains are taxed at different (lower) rates than ordinary income, and I believe that long-term capital gains from mutual funds are not taxed at all in India. You are not taxed on the increase in the value of your investment caused by an increase in the share price over the year nor do you get deduct the ""loss"" if the share price declined over the year. It is only when you sell the mutual fund shares (back to the mutual fund company) that you have to pay taxes on the capital gains (if you sold for a higher price) or deduct the capital loss (if you sold for a lower price) than the purchase price of the shares. Be aware that different shares in the sale might have different purchase prices because they were bought at different times, and thus have different gains and losses.  So, how do you calculate your personal return from the mutual fund investment? If you have a money management program or a spreadsheet program, it can calculate your return for you. If you have online access to your mutual fund account on its website, it will most likely have a tool called something like ""Personal rate of return"" and this will provide you with the same calculations without your having to type in all the data by hand. Finally, If you want to do it personally by hand, I am sure that someone will soon post an answer writing out the gory details." You can't actually transfer shares directly unless they were obtained as part of an employee share scheme - see the answers to questions 19 and 20 on this page: http://www.hmrc.gov.uk/isa/faqs.htm#19 Q. Can I put shares from my employee share scheme into my ISA? A. You can transfer any shares you get from into a stocks and shares component of an ISA without having to pay   Capital Gains Tax - provided your ISA manager agrees to take them. The   value of the shares at the date of transfer counts towards the annual   limit. This means you can transfer up to £11,520 worth of shares in the tax   year 2013-14 (assuming that you make no other subscriptions to ISAs,   in those years). You must transfer the shares within 90 days from the day they cease to   be subject to the Plan, or (for approved SAYE share option schemes) 90   days of the exercise of option date. Your employer should be able to   tell you more. Q. Can I put windfall or inherited shares in my ISA? A. No. You can only transfer shares you own into an ISA if they have   come from an employee share scheme. Otherwise, the ISA manager must   purchase shares on the open market. The situation is the same if you have shares that you have inherited.   You are not able to transfer them into an ISA. You have some good points, but get this - it will certainly come a point of time where say 80% of the working population can provide 100% of the goods/services everyone needs. Then this will get to 70%. 60%. This can result in two things - either huge unemployment problem or overproduction and all that comes with it - spoilage, lower prices, cost-cutting (i.e. again unemployment). It may not be soon, but I think it's inevitable. The problem with that is, so far, employment is a great way to redistribute wealth (a fair way let's say), which is the actual problem at hand. Jobs wouldn't matter if we had another efficient mechanism to do that. In fact, it would be better if humans didn't have to work at all and focus on leisure, science, art, w/e. But we don't have such a mechanism unfortunately. And as the need for a labor force shrinks, things are going to get ugly, even uglier than now. Since the supply of labor will grow with human population, the price of labor inevitably will go down, which means even more transfer of wealth from middle/lower class to the capital owners. "The $100,000 is taxed separately as ""ordinary income"". The $350,000 is taxed at long-term capital gains of 15%. Capital gains is not taxed at 20% until $415,050. Even though $100,000 + 350,000 = $450,000, only $350,000 can be taxed at capital gains. The total ordinary income tax burden will be $31,986 if single, in California. Caveat: By creating a holdings corporation (C-corp), you can section 351 that $100,000 into the C-corp for tax deferment, which won't be taxed until you take money from the corporation. Since you will hold 100% of the voting stock, all distributions will be considered pro rata. Additionally, you can issue yourself a dividend under the rules of 26 USC §§243-246 (a greather-than-80% shareholder who receives a dividend can write-off 100% of said dividend). As long as that dividend doesn't trigger §§1.243-246 of The Regulations by keeping the distribution just under 10% of E&P i.e. $10,000. Wages are deductible against basis so pay yourself $35,000 and keep $55,000 in the corporation and you can decrease the total liabilities down to $22,000 from $31,000, which includes the CA franchise tax. You don't have to pay yourself any money out a corporation to use the money." "I'm not a tax lawyer, but from what I can tell it looks like you'd be eligible to use your contractor income to fund a Solo 401(k).  http://www.irafinancialgroup.com/whatissolo401k.php ""To access these benefits an investor must meet two eligibility requirements: The presence of self employment activity. The absence of full-time employees."" And from the IRS itself (http://www.irs.gov/pub/irs-tege/forum08_401k.pdf)" "One way to do these sorts of calculations is to use the spreadsheet version of IRS form 1040 available here.  This is provided by a private individual and is not an official IRS tool, but in practice it is usually accurate enough for these purposes.  You may have to spend some time figuring out where to enter the info.  However, if you enter your self-employment income on Schedule C, this spreadsheet will calculate the self-employment tax as well as the income tax.  An advantage is that it is the full 1040, so you can also select the standard deduction and the number of exemptions you are entitled to, enter ordinary W-2 income, even capital gains, etc. Of course you can also make use of other tax software to do this, but in my experience the ""Excel 1040"" is more convenient, as most websites and tax-prep software tend to be structured in a linear fashion and are more cumbersome to update in an ad-hoc way for purposes like tax estimation.  You can do whatever works for you, but I would recommend taking a look at the Excel 1040.  It is a surprisingly useful tool." It depends and I would not just jump into conclusion as I have seen cases where offering some services are not U.S. sourced income. I'll advise you speak with a knowledgeable tax professional.