Hello and thank you for reading and offering guidance. I'm newer to REI. I have a SFR that was previously used as my primary until 2020. I purchased a duplex in 2021. I replaced a roof, remodeled a bathroom, replaced a HVAC system and several other costly projects. I also took a withdrawal from my 401k in 2021 for downpayment costs on the duplex. My fear going into tax season is claiming too much of a loss and hurting my DTI for potential purchases in 2022. Is there a rule or guideline you follow to balance taxes so you are claiming appropriately but not to your future borrowing power?

Most of these costs are not “immediately expensed” they get capitalized and depreciated. Assuming you occupy one of the units, the costs associated with your unit are not expensed or depreciated at all…they simply raise your cost basis for gain calculations when you sell. 

Hey Aron. All capital expenses should be classified that way. When I was learning in the beginning I would send my draft return to my lender for feedback before filing. 

@Wayne Brooks that is great information. I appreciate your help.

@Brandon Beatty I reached out to my lender and he was helpful. He also advised to work with my CPA to make sure I’ not too far into the red. I like your idea of sending it to the lender for review. Thank you for your help!

@Aaron A.

Lenders normally add back depreciation and certain 'one time' expenses such as major repairs/renovations.

Best of luck.