Will tax deductions negatively affect income for loans?

[Kristen Watts]

Hello all! Question for you: my accountant says I'm entitled to about $7,000 back on my tax return based on depreciation, expenses, etc. on my three properties (one my own home purchased in 2011 and the other two rentals purchased in 2013). However, she says this will lower my income on my tax return significantly below what I actually make in my "normal" job as a teacher. I'm not sure if banks will look at my actual income from my job, or follow the income that will appear if I take the deductions. I'm afraid I won't be able to get any more loans if I take the deductions. Any advice?

[Jon Holdman]

Legitimate deductions need to be taken.

When you sell an investment property, you will need to pay a tax on unrecapatured depreciation. It doesn't matter if you actually took the depreciation or not. Even if you did not take depreciation, the basis on the property is reduced by the amount of depreciation allowed, increasing your gain.

All other expenses are actual money spent. You cannot deduct any expenses related to your residence, but you need to deduct expense from the rentals.