Write off repairs or keep my profit high for loan limit purposes?

Question

I have a duplex that I live in one side with roommates and rent out the other. I want to buy another property in 2019 and am looking in a more expensive area of town.

To be approved for a higher mortgage amount by a bank I need to show as much profit as possible on my tax returns. Writing off the repairs I made this year ($15k for new roof, gutters, bathroom remodel, etc) will wipe out almost all the "profit" from my duplex and affect my loan approval amount.

Should I bite the bullet and not claim any losses and pay full taxes? Or write off everything I can?

Another option I have is to write off everything I can, but then pay off my car loan with the money I would have paid in taxes. This will reduce my monthly loan payments by $200 which will help a little in mortgage approval limit. Kind of a middle ground. Still benefiting me more than paying taxes but takes a chunk of $$ out of the bank.

Let me know what you think all input is appreciated.

Simon W. · Answer

If you send your financials to the lender then I would just include in the balance sheet as Building Improvements.

I strongly suggest consulting with a CPA in terms of how to file your tax returns. My ability is to manage the books and communicate with the CPA/auditors.

Max T. · Answer

If you certainly can afford the new payments then you won't need to artificially enhance your income to qualify for it.

Nicholas Zeiler · Answer

Just solo right now. Its my only property. Can you give me some more insight into how those repairs could be shown as an asset?

Thanks!

Nicholas Zeiler · Answer

Good point on not paying taxes on money not earned.

Yes they do. However I certainly can afford the payments even without including the potential income from a new property. Do you have any other advice?

Max T. · Answer

I'd rather not pay the taxes on money that wasn't actually earned.

The banks have these income guidelines for a reason. They want to make sure you can actually afford the monthly payments.

Simon W. · Answer

Are you trying to show this on your Income Statement?

Just put those repairs into CapEx so this becomes an asset. I am not sure how you are setup. LLC or just solo?