Heavy expenses or heavy depreciation what looks better?
So getting ready for the year end taxes and thinking about our 2018 goals has left me with a question. In 2018 we want to have as much borrowing power as possible. This in turn would mean making our business and taxes look good for the years past, only problem is we do not like paying high taxes just so our business can look good on paper. So in my opinion there are a couple different ways to do our books and I want anyone’s advice to which way is better then the other. These are just examples on a real estate LLC. That makes $100k a year
1.HeAvy expenses. Profit $100k year, but keep track of every last dollar spent on every move we make and have 90k in expenses. So 10k profit for the year. Will not have to pay a lot of taxes but it does not look good to show the bank you only made 10k profit for the year
2. Lower expenses but heavy depreciation on all assets. Profit $100k year , 20k expenses. So 80k profit for the year. But then do itemized depreciation on all properties and vehicles to total -70k. So 10k profit. Looks good to show the bank the business was 70k more profitable then above, but still only show 10k profit to the IRS because of the depreciation.
Now I know in the big picture mixing one and two together to show a loss for the year would be best for tax purposes, when you go to get a loan and show them you are losing money they usually do not want to give you tons more to invest.
Does option number 2 look better on paper when you go to a bank to get a loan or do they both look the same?