Should I take the tax deductions or claim the income?

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Should I take the tax deductions or claim the income?

Dave Mosher
Broad Brook, CT · Member since 2017 · 32 posts · 3 votes
I am closing on my first SFR on December 20th. Financing has gone great with no problems. I went through a local bank, who offers portfolio products. I was talking yesterday about what I would need in order to purchase again in the future. I own 2 businesses, one of which is a small farm that I took a $10k loss on last year. I figured this was good because of the tax sabings. Now because of this loss it is hurting my ability to get future loans because of the debt to income. I currently own my home with about $50k in equity, plus 8 acres of raw farmland with $30k in equity. So this SFR is my 3rd mortgage. I can't take a HELOC on the land because it is land. Should I show a profit on the farm, pay the taxes and be able to qualify for more loans or go with a HML? Thanks for the advice,
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Basit SiddiqiBusiness Member
Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
8y

@Dave Mosher

You should not lie on a tax return in hopes of qualifying for a larger loan/mortgage. Doing so may be considered mortgage fraud.

You may want to consider being less aggressive on expenses relating to your farm business by doing things such as taking regular depreciation instead of bonus depreciation/section 179 expense if applicable.

[email protected]917-280-8544
Basit Siddiqi CPA4.880 Reviews
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  • Account Closed
    Earth · Member since 2017 · 297 posts · 187 votes
    8y
    I would claim the income and pay more taxes to make the tax return look great to the lenders so you have a higher borrowing power for low interest rate of 5%. The cost of HML is much higher than the “extra tax” you pay.
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  • Basit SiddiqiBusiness Member
    Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
    8y

    @Dave Mosher

    You should not lie on a tax return in hopes of qualifying for a larger loan/mortgage. Doing so may be considered mortgage fraud.

    You may want to consider being less aggressive on expenses relating to your farm business by doing things such as taking regular depreciation instead of bonus depreciation/section 179 expense if applicable.

    [email protected]917-280-8544
    Basit Siddiqi CPA4.880 Reviews
    View Page
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  • Account Closed
    Earth · Member since 2017 · 297 posts · 187 votes
    8y
    Dave Mosher I do not mean to ask you lie on the tax return. I meant the same, take less expenses to make the tax return look good. Many people write down as much expenses as they can try to minimize the tax, but this will hurt their borrowing power
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  • Account Closed
    Earth · Member since 2017 · 297 posts · 187 votes
    8y
    I heard stories that people lie and didn’t report their actual higher self employ income to avoid higher tax. But their lies on not reporting their higher income in fact does hurt their borrowing power.
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  • Dave Mosher
    OP
    Broad Brook, CT · Member since 2017 · 32 posts · 3 votes
    8y

    thanks, yes basically I was wondering if I should be less aggressive. I don't want to lie, but was curious as to using a HML vs paying more tax. seems like it is pretty clear I should just be less aggressive, I appreciate everyone's insight!

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  • Dave Mosher
    OP
    Broad Brook, CT · Member since 2017 · 32 posts · 3 votes
    8y

    And .maybe I should count my repairs as depreciation instead of straight deductions.  basically wait to advertise it for rent, so it wouldn't be deductible.

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