Your CPA Saved You Thousands. It Might Cost You The House

Here's a conversation I've had more times than I can count since 1994.

A self-employed buyer sits down with me. Great business. Real money coming in. Then I open the tax returns, and on paper? They barely make a living.

What happened? April happened. The tax bill came in bigger than expected, nothing was set aside to pay it, and the CPA went to work finding every deduction possible. Totally legal. And totally devastating to their buying power.

Here's the part nobody tells you: lenders don't qualify you on what your business brings in. They qualify you on what's left after the write-offs, averaged over two years. Every deduction that lowers your tax bill lowers the house you can buy, too.

The fix is simple, and a little boring. Set aside 25 cents of every dollar of profit for taxes. Every time. No April panic, no reason to over-deduct.

And if your returns already tell the wrong story? You still have options, like bank statement loans.

I broke down exactly which write-offs underwriters add back (and why meals can hurt more than you think) in the full post: How write-offs affect getting a mortgage while self-employed.

Cheers!

Mark Smith | NMLS #295910 | Gardner Financial Services, LTD., dba Legacy Mutual Mortgage | NMLS #78675 | Equal Housing Lender