The basics
What does this mean?
A write-off (also called a deduction) is a business expense you subtract from your income before you pay taxes. Your car, phone, software and a home office can all count.
That’s smart for taxes. The catch is that a traditional mortgage looks at the same tax return your accountant worked to keep low.
On a standard loan, the lender starts with your net profit: what’s left after expenses, not what your business brings in. It usually averages your last two years of returns.
A few non-cash expenses can be added back, like depreciation (writing off the cost of equipment over several years). Everyday costs stay subtracted.
Most important
What are your options?
There isn’t one right answer. The best path depends on how you’re paid and what your returns show.
Non-QM (non-qualified mortgage) programs are lender-specific. Rates, down payment and reserve requirements are usually higher than conventional, and guidelines differ from lender to lender.
The numbers
Let’s look at an example
Maria runs a design studio. Her business deposits about $400,000 a year. After write-offs, her tax return shows $110,000 of net profit, plus $12,000 of depreciation.
Tax-return method
Bank statement method (hypothetical)
Now say the lender allows a 45% DTI and Maria has $1,500 a month in other debts. Here’s how much room each method leaves for a house payment:
What this means: same business, same person. The bank statement method roughly doubles the payment she can qualify for. She’d still compare it against the higher rate and down payment that usually come with it.
Assumptions: hypothetical figures, two identical years. Transfers between accounts and loan deposits are already removed. The 50% expense factor is an example; lenders set their own, and some accept a lower factor with a CPA letter. Housing payment includes principal, interest, taxes, insurance and any HOA. Try your own numbers in the bank statement income calculator.
From Derek
What would I do?
I’d start by running your last two years of returns exactly the way a conventional underwriter would, add-backs included. If that works, it’s usually the cheapest loan. If it doesn’t, I review your bank statements, compare expense factors across lenders, and show you both options side by side: payment, down payment and cash to close.
Derek VailMortgage Broker · NMLS #1233953Your move
What should you do next?
- Gather two years of returns and 12–24 months of statements. Business and personal. That lets us compare every method at once.
- Flag deposits that aren’t income. Transfers between your own accounts, loans and refunds get removed anyway, so it helps to know them up front.
- Talk to me before your next return is filed. Then you and your CPA can make the tax-versus-buying-power decision on purpose.