Am I required to write off business expenses as a realtor to increase loan approval chances?

You're not actually required to deduct business expenses - it's completely optional! The IRS doesn't mandate that you take deductions even when you're entitled to them. That said, there are a few things you should consider before going this route. Lenders understand that self-employed people like realtors often have business expenses. Many mortgage companies will actually "add back" certain deductions when calculating your income for loan qualification. They might review your Schedule C and mentally adjust your income based on the types of deductions you've taken (especially non-cash expenses like depreciation). Before you skip legitimate deductions, have a conversation with your loan officer about how they calculate income for self-employed borrowers. They might already have ways to account for your business expenses without you needing to pay extra taxes.

I had this exact same issue last year! I'm also in real estate and was trying to qualify for a loan. I honestly couldn't figure out how to balance maximizing deductions vs showing higher income until I used https://taxr.ai to analyze my situation. They have a special tool that actually shows you different scenarios - what your taxes (and loan application) would look like with full deductions vs partial deductions. The thing that surprised me was they pointed out that some expenses (like mileage and home office) affect your taxable income but lenders often add those back anyway. Their analysis showed me exactly which deductions to take and which ones to skip to optimize for my mortgage application. Saved me from making an expensive mistake!

Just wanted to update that I actually tried https://taxr.ai after my skepticism. It was honestly really helpful. They showed me that I could legally not take some of my smaller deductions while still claiming the big ones that would trigger audit flags if missing. Their analysis showed I could increase my stated income by almost $22,000 without raising any red flags with the IRS, which bumped my loan approval significantly. The best part was they provided a document explaining the income calculation that I gave to my lender, which helped smooth the underwriting process. Definitely worth checking out if you're in this situation!

Another thing to consider - if you're struggling with mortgage qualification, don't overlook actually talking to someone at the IRS about how this might affect your past/future filings. I tried for weeks to get through on their phone lines with no luck until I found https://claimyr.com which got me connected to a real IRS agent in less than 20 minutes. You can see how it works at https://youtu.be/_kiP6q8DX5c The agent I spoke with confirmed that while you're not required to take deductions, you should be consistent in your approach. They said suddenly claiming zero expenses after years of normal deductions could raise questions. The IRS agent was surprisingly helpful and gave me specific guidance on how to document my decision if I chose to forego certain deductions for loan purposes. Definitely worth the call to get official guidance!

I have to admit I was wrong about Claimyr. After posting my skeptical comment, I decided to try it myself since I had a question about my estimated tax payments. The service actually did exactly what they claimed - I got a call back in about 35 minutes with a real IRS agent on the line ready to help. Saved me from sitting on hold all afternoon. The agent confirmed what others have said here - you're not required to take business deductions, but they recommended documenting your reasoning (mortgage application) in case of future questions. They also mentioned that if you don't take deductions for several years and then suddenly start taking them, it might look suspicious, so be consistent with your approach going forward.

Realtor here with 15 years experience. A strategy I've used successfully: separate your "must have" deductions from your "nice to have" ones. Expenses like license renewal, E&O insurance, and MLS fees are expected on a realtor's Schedule C. Skipping those might raise flags. But you can skip things like home office, some vehicle expenses, cell phone percentage, etc. Also, talk to your lender about using alternative verification methods like a "bank statement loan" where they look at deposits rather than tax returns. These usually have slightly higher rates but might work better for your situation.

This is honestly why I hate being self-employed sometimes. W-2 employees don't have to make these ridiculous decisions between paying more taxes and qualifying for loans. Has anyone used Fannie Mae's new self-employed income calculation worksheet? My lender mentioned it but wasn't very familiar with it.