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I have heard of providers showing a loss in order to obtain a new home loan or to refinance. Is there another way of going about this?


What about not making a profit or loss? Some child care providers have expensive homes with high T/S%, but their home office expenses will not allow a loss for the business. Do you think that repeatedly showing $0 for the business is a 'red flag' for the IRS?


Tom Copeland

Thanks for your comments. You don't want to show a loss when you want to buy a home or refinance. On the contrary, you want to show as much of a profit as possible. To show more of a profit you want to point out to the loan officer that your depreciation expenses and house expenses are not direct business expenses and should be added to the profit.

Repeatedly showing a zero profit but no loss is problematic. It doesn't show that you are trying to make a profit and can attract more attention from the IRS.


Thank you for your reply. Interesting... so we basically need to find a loan officer that will consider our income before tax (gross)? Thus far, we have been turned away because they are looking at our income after all deductions. My spouse and I are both in family child care. We found this to happen even with 20% down.

Tom Copeland

Nicole - The loan officer should look at your ability to repay a loan. This is best shown by preparing a monthly cash flow statement showing income and actual expenses


Thanks Tom! I'll talk to our accountant.

Sharon A. Brown

I used to do daycare in my home and now I want to keep the house through my husband and my divorce. I will also be opening up my daycare again. I noticed he showed a loss for the first year I opened and also depreciated the house for $3119. Will I have a penalty when I sell? What to be aware of in the divorce for recapture tax?
Sharon Brown

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