My husband is self-employed in a field where car expenses aren’t typically deducted for business use, but he’s able to do so. Last year, a mortgage broker told us that if we used the standard mileage deduction, we could add that amount back to our gross income. In 2023, we deducted $11,000 in mileage, but when we applied for a loan, they said they couldn’t add the mileage back, and we were denied the loan. This year, we’re considering not deducting miles at all and paying extra taxes to show a higher net income. Our accountant doesn’t understand what the broker meant. Does anyone know?
In most cases, depreciation is added back when calculating your ability to pay for a mortgage when using the actual expense technique.
Is it possible to apply the depreciation component—currently 28 cents per mile—for the same purpose while using the mileage expense method?
Should further mention that a taxpayer must account for all legitimate business expenses even if they are not obligated to select the most advantageous treatment.
I’ve successfully argued for such by presenting the news that depreciation accounts for a fraction of mileage rates.
Had you been using the same car to deduct real car expenses before switching to mileage? That could provide a problem.
While some lenders will make the appropriate adjustments for this deduction, others believe that since this is an expense that his business must incur, the money is not available to repay the loan.
Changing your taxes to reflect more business profit than you actually have by omitting critical business expenses is officially considered mortgage fraud.
I’m grateful; I was unaware that it was a scam. That is absolutely not what we want to accomplish! We filed taxes for the first time last year.