Depreciation Being "Added Back" when held in 3 way LLC?

5 Replies

Hello All,

I am working on refinancing my own primary residence and owning my rentals in a multi-member LLC seems to be affecting my ability to "add back" the depreciation that this can normally be a done with when held personally. 3 lenders have told me this.

I wondered if good lender like @Chris Mason or one of the tax pros out there could comment on if this is a Federal rule or a bank "overlay".

I am trying to get a 30 years fixed Fannie or Freddie loan. We even went over my Form 1065 K-1 box by box. My 1/3 show a -$805 loss in box #2, and also shows a +$4200 in box #19 (distributions).

Am I just out of luck here?  I have a second partnership with about the same figures too.

Thanks, Dan Dietz

No tax issue that I can think of. 

I'm curious as to why the depreciation can't be added back to a partnership as well. Someone please tag me when one of these lending genius' share. 

@Natalie Kolodij what the one lender who I dug into it further with said, quoting from the "Fannie & Freddie Guidelines" is "to use the LESSER figure from either Box #2 or Box #19.

She "did not see a way to add the depreciation back in from the LLC :-(

Dan Dietz

Ya They would need the actual 1065 and to calculate your 50% or whatever your portion is I guess- That's interesting. 

Originally posted by @Daniel Dietz :

Any thoughts from the Lenders out there, @Chris Mason , @Albert Bui or others? There must be a way to add the depreciation back in from a multimember LLC, isn't there?

Thanks, Dan Dietz

I have not had issues adding back depreciation but you need to have the full tax return to add it back not just a K1 and sometimes the issue with multi member LLc’s is that you may or may not have access to the partnership return where all the depreciation is detailed, especially if you’re a passive partner.