When Tax Returns are Necessary

When Tax Returns are Necessary

Federal income tax returns are required when one or more of the following income sources are being used to qualify:
  • Commission earnings that amount to 25% or more of the borrower’s total employment income;
  • Employment by family member(s) or an interested party to the purchase transaction;
  • Rental income from an investment property (if acquired prior to the most recent tax filing);
  • Income from temporary or sporadic employment (for example, seasonal income);
  • Income reported on IRS Form 1099 (for example, capital gains, royalties);
  • Income earned from a foreign corporation or foreign government and paid in foreign currency;
  • Income earned that cannot otherwise be verified by an independent and knowledgeable source;
  • Income from interest and dividends;
  • Income from self-employment (defined as a 25% or more ownership in the business);
  • Income reported to the borrower on schedule K-1 (regardless of percentage of ownership).
In these cases, the tax returns provide the underwriter with a more comprehensive view of the borrower’s income, and enable identification of any related expenses that may need to be factored into the income calculation.

Learn more about income qualification.

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