Curious if in terms of mortgage loan qualification is the calculation of DTI the same if someone takes a 179 deduction vs special bonus deprecation? For example sole owner of an s corp buys $50k asset, the business income is $25k. Taking as a 179 deduction I believe appears to show positive income on box 1 of $25k on the k1, and 179 deduction in box 11 of the k1 of $25k? The s corp owners 1120s I believe still shows $25K of income? Alternatively taking as special bonus deprecation, the business owners k1 now shows in box 1 a net loss of $25k, and there is nothing listed in box 11 since they did not take a 179 deduction. However the 1120s I believe would show on page 1 line 14, $50k of depreciation?
The business owner needs to get a mortgage loan. Will underwriters add back the depreciation in either scenario?
You will have to ask the underwriters and/or lenders, but they should understand that depreciation (cost recovery deductions), in whatever form for tax purposes, is a phantom deduction.
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