Help with DTI breakdownn

[Nathan Huyett]

My wife and I have started looking for a new primary residence. I hold the mortgage for our three-unit property; my wife holds the mortgage for our current home. When speaking with a lender, he indicated that if I take a loss on the rental, the income would not count, which would obviously increase my DTI dramatically. Any suggestions on how to maximize the write-offs on the rental, while still having the income count?

[Chris Mason]

Hi @Nathan Huyett,

• Depreciation. Most people know about this one this one, but worth mentioning anyways. Ask your tax professional what you can lawfully depreciate, and go nuts. Depreciation decreases your taxable income, without reducing your mortgage qualifying income. 
• (BRRR people, especially read this one!) Put one time expenses on "line 19: see statement X" of schedule E, and keep all invoices. A "new water heater + installation" invoice is not for a normal annual expense, so if you can prove that's what it was then that expense can be 'added back.' By contrast, if the invoice says "water heater repair," that's normal maintenance and will count against you. The dollar amounts on invoices need to exactly add up to what you tell the IRS.