If you did not do a "wrap mortgage" or "mirror mortgage" to help them create "notes receivable income", they may need a cosigner to have enough income to qualify for their next mortgage.

When you sell a property that has been depreciated, the IRS requires you to "recapture" the depreciation deductions, taxing that portion of the gain at ordinary income tax rates.

This is usually done to increase your rental income but it comes with a price as you are finding out.  

This is much lower than the costs associated with refinancing.Benefits of Mortgage RecastingLower Monthly Payments: The most immediate benefit is a reduced monthly payment, which can free up cash for other financial goals.Save on Interest: By reducing your principal balance, you’ll pay less interest over the life of the loan, potentially saving thousands of dollars.No Credit Check or Appraisal: Unlike refinancing, recasting doesn’t require a credit check, income verification, or home appraisal, making it a quicker and simpler process.Keep Your Current Interest Rate: If you have a favorable interest rate on your current loan, recasting allows you to maintain it while still lowering your payments.Drawbacks of Mortgage RecastingRequires a Lump Sum: Not everyone has the cash on hand to make a significant lump sum payment, which can make recasting inaccessible for some homeowners.Doesn’t Shorten Loan Term: While your monthly payments are lower, recasting doesn’t reduce the length of your loan.

I did most everything I was supposed to do, increase my income, decrease my living expenses, save cash, etc.. 

I could be wrong.What you tell contractors is: if you do not separate labor from materials, then I have to report my ENTIRE payment, L&M, to the IRS as your income, and then it will be up to you to deduct materials from that income on your end. 

How much income do you need, and how much do you want?

For all methods you would want to find a market that has strong employment rates, strong income rates for the market, and is a growing or an established market. 

Which is an amazing income nonetheless.Serious question oh-great Blue-one: What risk exposure do you think he's carrying for this, whatever income? 

He calls and tells me "the income to mortgage isn't 1:1 and he is going to have to let the lender know."