Qualifying for a Mortgage with Small Business Tax Deductions

[Mark S.]

Hi,

I am a rather new investor with two duplexes in the DFW area. I also have a small photography business which helps reduce my personal taxable income.

The question I have is do I have to be careful about how many expenses I use as deductions to qualify for a new mortgage next year. My lender has told me that I need to show I can pay for 25% of the mortgage for new properties for next year. However, with the amount of money I am spending to get this new business going it greatly reduces my income after deductions and I am worried I may deduct too much so I cannot qualify...

So an example of this is our investment property income. We will make a profit on these this year but next year when we file our tax return we will most likely show no profit due to depreciation. What will the lender look at? The profit before or after depreciation?

Also I got a new job which has a healthy raise. I have a side business which is showing a loss. On our tax return we will show less taxable income after these losses from our side business. Will this keep us from getting a loan on our next property?

Just trying to see how all of this works so we can do what's best for all of our businesses.

Thanks for your help