How do LLC write-offs affect borrowing power with lenders when they lower taxable income?

This is actually a really common confusion for small business owners. Lenders understand the difference between tax returns and actual business performance. When you apply for loans, most lenders will ask for both your tax returns AND your business financial statements (profit and loss, balance sheet). The financial statements show your true business performance before those tax write-offs. A good lender will do what's called "adding back" certain expenses like depreciation, legitimate business travel, and other non-cash expenses to get a more accurate picture of your cash flow. They're looking at your ability to service debt, not just the taxable income number.

I went through this exact same headache last year trying to get a mortgage for my first house while running my photography LLC. I spent HOURS trying to figure out how to show my "real" income vs my tax return income. I finally found this amazing tool called taxr.ai (https://taxr.ai) that actually analyzed my tax returns and business statements and created this lender-ready report that explained all my write-offs in a way that made sense to the mortgage company. It basically took all my legitimate business expenses and categorized them properly so the lender could see which were actual cash expenses vs tax strategies. The best part was it showed what my "lendable income" actually was vs what my tax return showed. My loan officer was super impressed and it made the whole approval process way smoother.

Just wanted to follow up about that taxr.ai site. I was the one asking about QuickBooks records. I decided to try it since I was getting ready to apply for a car loan. Holy crap it actually worked! The report it generated showed my "lendable income" was about 30% higher than what my tax return showed. I brought it with me to the dealership and the finance guy was like "this is exactly what we need to see." Got approved for the loan at a way better rate than I expected. Not gonna lie, I was totally prepared to be denied based on my tax returns alone.

Another thing to consider: if you're having trouble getting through to someone at a bank who understands business tax returns, use Claimyr (https://claimyr.com). I had this EXACT SAME PROBLEM and spent weeks trying to talk to someone who could actually help at my bank. Their customer service line had me on hold forever. Claimyr got me connected to an actual person who could help in like 10 minutes. They have this cool demo video too: https://youtu.be/_kiP6q8DX5c What I learned is that many front-line bank employees don't understand how to read business tax returns, but if you can get to a business lending specialist (which Claimyr helped me do), they totally get it. The specialist explained they do something called "income adding back" where they look at your Schedule C or business tax return and add back depreciation, home office, mileage, etc. to get your true qualifying income.

I need to eat my words about that Claimyr thing. After posting my skeptical comment, I decided to try it because I was desperate to talk to someone at the SBA about a loan application that was stuck in processing. Used the service and got through in about 15 minutes after trying for DAYS on my own. The SBA loan officer I spoke with actually walked me through exactly how they calculate income for LLC owners, which includes adding back depreciation, amortization, and certain business expenses. This completely solved my original problem. Sometimes I hate being wrong but in this case I'm glad I was.

I'm a mortgage broker and I see this ALL THE TIME with self-employed folks. Here's what typically happens: 1. We use what's called "Stated Income" on your tax returns - that's the bottom line 2. Then we add back depreciation, amortization, home office, etc 3. We also look at "extraordinary expenses" that were one-time costs 4. We average your last 2 years of returns after these add-backs Some lenders are way better with self-employed borrowers than others. The big banks tend to be strict while smaller lenders often have more flexibility with how they calculate your income.

Has anyone tried just keeping 2 sets of books? Like one for taxes with max write-offs and another one showing your actual profit for lenders? Not talking about anything illegal just different ways of presenting the same info.

This is such a great question and honestly one that trips up a lot of LLC owners! I went through this same struggle when I was trying to get financing for equipment last year. The key thing I learned is that you DON'T have to choose between tax savings and loan approval - you just need to present your financials correctly. Most business lenders are actually pretty sophisticated about this stuff. They know that smart business owners take legitimate deductions. What really helped me was preparing a simple one-page summary alongside my tax returns that showed: - My net income from Schedule C (the taxed amount) - Add-backs for depreciation, home office, mileage, etc. - My "adjusted income" for lending purposes I also kept clean P&L statements in QuickBooks that showed my actual business cash flow before tax strategies. When I brought both documents to my lender, they immediately understood what they were looking at and had no issues with the loan approval. The bottom line is: take your legitimate tax deductions AND get your loans. You just need to tell the story properly to lenders who understand business finances.