Un-Reimbursed Bus. Expenses & Mortgage

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At any time except when qualifying for a new home loan, the bigger the number on their form 2106 the better.  Why?   The expenses on this form reduce taxable income.

Expenses on Federal 2106 Tax From

Prior to the tax changes effective in 2019, a number of expenses could be deducted on a 2106 Form.  Generally, expenses relative to conducting business go on the 2106.  For example:

  • Vehicle expenses
  • Parking fees and tolls
  • Travel expense – lodging, airplane, rental car etc…
  • Meals

Uncle Sam gives tax payers a break for un-reimbursed business expenses.   Naturally, people hunt for every tax break.  However, when buyers apply for a home loan their 2106 from can hurt them.

Arizona Lenders & Un-Reimbursed Bus Expenses

In theory, a phoenix area mortgage lender looks at a 2106 from the same as the IRS does.  However, lenders see these expenses cost home loan applicant real money.  In fact, mortgage underwriters lower income relative to these expenses.  After-all, this is why the IRS gives us a tax break for these expenses.  While the view from Arizona Mortgage Lender to IRS is the same, the impact these expenses have on your tax returns vs. your mortgage are very different.

The Phoenix area borrower claiming 2106 expenses is saying they spent their own income on business expenses.  Moreover, the borrower did not receive reimbursement.  As a result, underwriters lower the income used on a home loan application.

Exception to the Un-reimbursed Expense Rule

Certain un-reimbursed expenses can be added back to your income. At the end of the day, make sure you are working with an Arizona Mortgage Lender who knows tax returns.

By Jeremy House