Write-Offs vs. the Mortgage: How to Plan Your Tax Year With Your CPA and Your Mortgage Broker

Every business owner has felt this one. The same deductions that shrink your tax bill shrink the income a lender can use. You get a nice surprise in April and a bad one at the mortgage.

I am a mortgage broker in Oregon City with three businesses of my own, so I have made this mistake personally. Here is how to stop making it.

The two jobs that fight each other

Your CPA's job is to lower your taxable income legally. A good CPA finds every deduction you are entitled to, and the result is a return that shows a modest net profit.

A lender's job is to decide whether you can afford a house. They read that same return. The modest net profit is the number they use. The lower it is, the smaller the loan.

Neither of them is wrong. They are answering different questions, and nobody is answering the one that matters to you, which is how to do both.

The fix is a meeting, not a trick

There is no loophole. The answer is to get your CPA and your mortgage broker in the same conversation before the tax year ends, and decide together.

Some deductions are paper. Depreciation is the big one. A lender adds it back, so taking it does not cost you at the mortgage. Take it.

Some deductions are real cash expenses. Equipment, travel, meals, contract labor. If the purchase is necessary, make it. If it is optional, the question is whether it is worth more to you as a tax saving this year or as qualifying income next year. That is a math problem with a real answer, and the three of us can solve it in half an hour.

Timing the purchase year

A lender usually looks at two years and leans on the lower one or the average. If you have a lean year followed by a strong year, the strong year helps. If you have a strong year followed by a lean one, the lean year hurts more.

So if you want to buy in eighteen months, the two tax years that matter are already underway. The return you file this spring is half of what the lender will see. Plan it that way.

What to tell your CPA

Tell them you plan to apply for a mortgage, when, and roughly what you hope to buy. Ask them to flag any deduction that is optional this year. Ask whether any income can be documented more clearly. Ask them to be available for one call with your mortgage broker. Most CPAs are glad to do this. They would rather plan it with you than explain it to you after the lender says no.

What I bring to that call

I bring the lender's view. Which deductions are added back and which are not. How declining income is treated. What the file will need to look like. I do not give tax advice and I stay out of your CPA's lane, the same way I expect them to stay out of mine.

The simplest version

If you remember one thing, remember this. Before the tax year ends, ask your CPA and your mortgage broker to talk to each other. One call. It is the simplest planning you will ever do.

I serve Oregon City, Clackamas County, Multnomah County, Washington County and the rest of Oregon. Message me a year before you want to buy and I will tell you what to do this year.

Becky Chambers, Mortgage Broker, NMLS #2814018. Freestone Mortgage, NMLS #2613454. Licensed in Oregon. Equal Housing Opportunity. For informational purposes only. This is not a commitment to lend. Not tax advice. Verify tax questions with a licensed tax advisor.