I'd like to get my first home maybe within a year. While filing my taxes right now, should I file all, some, or none of the my business expenses?
I'm curious to know if 1) it is okay to file no expenses, and 2) would the increased taxable income help to better qualify me for a mortgage?
If I file all expenses, which lowers my taxable income, will lenders still look at my monthly debt (bills) relative to my lower income (those bills are my expenses, which I'm debating about reporting)?
Does not reporting the expenses mean I have a higher taxable income from which lenders will subtract my debt?
How should I file my expenses to best qualify for a mortgage?
Well, turns out that if I don't report expenses, the tax cost is quite high, so it might not be an option.
Anyways, still curious to know how one approach or the other would impact mortgage qualification.
File an accurate return.
Inflating a return so you qualify for more mortgages is mortgage fraud.
@Basit Siddiqi Thanks for advice! Is not filing expenses considered to be inflating? (totally new to this stuff)
completing a tax return requires you to sign the return. Signing a return says that the return is accurate. Not reporting expenses is not an accurate return.
Choosing to leave off expenses is just as bad as choosing to not report all your income.
Either was is filing a fraudulent tax return.
And if you're doing it to get a loan, you're not also committing mortgage fraud.
Thanks for info you both! I definitely don't want to do something illegal. I will file all my expenses (plus if I didn't, the tax would be so high).
(Just a thought, but would the IRS be happier if I didn't report expenses and therefore paid more tax? Seems like it would work in their favor. :)
I advise you like others to not commit tax fraud. You are paying more to Uncle Sam to defraud the mortgage company. The lender would give you money based on a lie. That is called deception.
Like the others have stated, tax fraud comes into play when not filing expenses.
I have a brother who is a minister which allows him to legally claim quite a bit of his income as expense lowering his taxable income. He works with his banker and they’re working with him in light of his entire financial situation. Smaller banks usually work with situations like this a lot more than the bigger banks.
@Joe Pea if you are self employed, then the bank is relying on your taxes to verify income. So if you have higher expenses in your business, it will affect your gross income. That will affect the amount of loan you qualify for.
As you already determined, not claiming expenses results in higher taxes so from a financial standpoint, it doesn't make sense.
My suggestion if your net business income is too low, you should either figure out how to increase price or decrease cost. Taxes are not your problem.