When to stop writing off expenses to prove income?

C

CLKeenan

Banned
Jun 24, 2006
2,506
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Boston, MA
So here's kind of a conundrum I'm in. I'm looking to buying a house in the near future (next year or so). I have my full time job that pays well and I have my website earnings that also pay well. Typically, in the past my goal when it came to my taxes, was to reduce my income as much as possible. Anything that could potentially be used as a business expense, was written off. Ideally, I'd be making $0 from the website as to not pay self-employment taxes.

Now that I'm looking to buy a place, lenders will ask for my tax forms as a proof of income for the debt-to-income/front-end/back-end ratios and will see that I make nothing from my website because of all my expenses. Any suggestions other than the obvious don't write off so much?
 


Enjoy your complementary audit from the IRS.

Also if your business makes 0 taxable income for too long, the IRS may treat it as a hobby and you'll no longer be allowed to make any deductions.

I suggest talking to your CPA about this.
 
Are you not able to use your gross income from the websites as proof?

I know when I use to fill out forms for credit back in the day, they asked for gross income not net.

Times might have changed though....
 
I think lenders will be looking to see proof of income for at least two years, if not three. You best talk to somebody now if you're looking to buy in the near future.
 
CLKeenan said:
For people with self-employment income, they ask to see the net income (for home loans at least).
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I know, but they'll want proof by way of tax returns and/or financial statements. If you haven't shown any profit for the last couple of years, you need to talk to someone who can advise you going forward.
 
If your full time gig pays well and you have a good credit score and credit history your golden. They won't give a fuck about your websites -- it's not relevant; as long as your job And your downpayment are going to carry the ball.

Btw: as a mod you might want to think about deleting your comment regarding the website earnings. Just sayin.
 
bluechinagroup said:
Enjoy your complementary audit from the IRS.

Also if your business makes 0 taxable income for too long, the IRS may treat it as a hobby and you'll no longer be allowed to make any deductions.

I suggest talking to your CPA about this.
Click to expand...
This made me lol. QFT.
 
eliquid said:
Are you not able to use your gross income from the websites as proof?

I know when I use to fill out forms for credit back in the day, they asked for gross income not net.

Times might have changed though....
Click to expand...

I dunno about other shit but for home loans they look at your bottom line.
 
I got a home loan 2 years ago only requirement was bank account statements to see how much was in there ( 6 figures) Didnt provide any irs forms. Bank of america.
 
Find a good mortgage broker and push for details on what the underwriters want before counting self employment income and the increase in interest rates for lending based on self employment income. A good broker will provide the exact answer based on the current market.

Choosing to not take valid business deductions to qualify for a larger mortgage is not a good idea. If you have been taking deductions for cat food and clothes, it would be a good time to get your books cleaned up.
 
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