Dealing with Write-Offs
Self-employed workers have a hard time demonstrating to residential lenders that they meet income requirements, according to The Wall Street Journal. Since self-employed workers don’t receive a W-2, lenders have to consult tax returns to verify the applicant’s income. The WSJ reports — That’s a challenge for lenders, because on one hand, self-employed applicants need to show enough income to qualify for a home loan. On the other hand, they want to lower their taxable income by taking deductions and write-offs that they’re legally entitled to.
Self-employed business owners will often write-off personal and business expenses, such as office equipment and car leases. For this reason, net income reported on a tax return may not be an accurate reflection of business earnings, the report continues. WSJ offers tips for self-employed applicants: find a good accountant who can explain business cash flow to a potential lender and find a lender with enough experience to understand a self-employed applicant’s tax return.
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