Bank sees Carryover losses seen as liability in refinancing

[Lance Anderson]

Currently have 3 rentals carrying legit losses on my tax return for a number of years now. I understand that this will be useful when I sell, in order to reduce my capital gains tax. It also reduces my AGI from my 9-5 by up to $25k per year. 

However, while I see this as an asset to reduce current and future tax liability,  banks see this carryover loss as a liability. is there any way to overcome this? Any banks out there that use other financial metrics to assess ability to repay? Thanks for any ideas. 

[Don Konipol]

@Lance Anderson

You have described the great dilemma of small business/investment. Do you minimize profits shown on your tax return so that you pay the least amount in taxes or do you bypass current deductions so that you present the best picture for financing?

When you take depreciation deductions you get current tax savings, but that depreciation is recaptured as ordinary income when you sell the property. So, in effect rather than lowering your capital gains profits at time of sale, these depreciation deductions increase the profit shown, and may result in being taxed at the higher ordinary income tax rate. This is known as paying taxes on “phantom” income.