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When Deductions Come Back to Bite You

Blog by Kristen Meyer | March 21st, 2014

As an independent business owner, I enjoy writing off all of my business expenses.  Self-employed people can really whittle their adjusted gross income down with some diligent record keeping.

When can that be a bad thing?  

When you apply for a mortgage.  Any lender will look at your income as reported on your tax return.  Unfortunately, that $40,000 you wrote off now does not exist in the eyes of a mortgage underwriter.  I've seen a lot of my clients get caught in this trap.  If you are considering a home purchase in the next couple of years, plan ahead.  The best advice I can offer is to have a consultation with a reputable lender well in advance of when you are ready to apply.  A great mortgage broker will be your advocate and give you a framework in which to prepare for likely the biggest purchase of your life.  

We've worked with a lot of mortgage pros in Seattle and have a short list of who we think are the best - please email me for a free copy of that list.  Always ask a CPA about your individual tax situation.  Happy Accounting!  kmeyer@kw.com