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How deducting Meals expenses can hurt your home loan, and what to do about it

Updated: Jun 3, 2019


Did you know that when you write off meals expense you can only write off half of the actual expense, but lenders deduct the full expense?


Their logic is that your actual expense was twice as much as your deduction, so they “hit” you for it (deduct the actual expense). This article will help you categorize expenses correctly, so that this guideline doesn’t hurt you.


I disagree with lenders’ logic. The IRS allows a 50% deduction because they assume you were entertaining a client and you ate half the food. You would eat anyway, so you should not be allowed to deduct the cost of your food. I agree with the IRS.


I disagree with lenders deducting your food expense from your income because you would eat even if it not for a business-related meal, right? Do they deduct food expenses from salaried borrowers? No. Then why deduct personal food expense from self-employed borrowers? It doesn’t make sense to me.


But last time I checked, Fannie Mae, Freddie Mac, banks and credit unions didn’t ask me if their guidelines make sense. So, you and I must live with it the way it is. My point for you is that it is best to avoid being aggressive when deducting meals expenses.


Many people think that whenever food is involved in promoting their business, they should categorize it as a meals expense. However, if you provide food for an event, it is Promotion and Advertising. If I bring food to an open house to support one of my realtors, I am not eating half of the food. It is likely that I don’t eat any of it. That is categorized as Advertising because I am promoting my business to many potential buyers.


You can write off 100% of Promotion and Advertising as opposed to 50% of Meals. Categorizing these expenses accurately is important because the lender will “hit” you for the entire expense anyway. If it is truly Advertising, not a meal you shared, then you are entitled to the full deduction.


This tip affects all self-employed borrowers. Other articles describe issues and solutions for many types of borrowers, including people contemplating divorce or paying support, and every type of tax structure for self-employed borrowers.


If you have questions or want help assessing your situation, you can contact me at 877-728-2008; CustomerCare@HollyGustlin.com


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