You must trace the withdrawal proceeds to determine interest expense type and deductibility.

I’m looking to refinance both properties without using my tax return since it showed “loss” only because of deductibles and expenses from my current flips.

Hey Levi That is absolutely not true and I’m sorry you were misinformed, just like any property owner can sell their home for sale by owner you can manage your own rental. 

In some cases, however, you may be phased out of taking a deduction for contributions to a tax-deferred IRA or the ability to make contributions at all to a Roth IRA dependent on income thresholds.Best to have a conversation with your licensed tax advisor that would be specific to your situation and goals.

But in researching the statutes for you I found this in Section (2) of 197.472 Redemption of tax certificates: (2) When a tax certificate is redeemed and the interest earned on the tax certificate is less than 5 percent of the face amount of the certificate, a mandatory minimum interest of an absolute 5 percent shall be levied upon the face value of the tax certificate.

The expected income was deducted from the seller and kept in escrow - released over time as the reservations occurred.

You can amend your return (however, underwriters will see if its amended, hopefully they have no problem with you doing that, many do and particularly if its right before a loan application) . this is all my opinion and no promises:Certain deductions on your return do not count against your income and the main one is deprecation . 

Ask if you can make the repairs and deduct these from the rent owed.

@Peter Clapham   Your MLO can ask for one time exception for that huge deduction with  paper trail. 

It’s also important to know what the lender charges for closing costs as that amount will he deducted from your $60k.