🗺️ What Am I Looking At?
A W-2 is the annual wage statement from the borrower's employer. Every employer issues one. You need the most recent two years of W-2s plus current paystubs. The key number is Box 1 — that's the taxable wages reported to the IRS. Do NOT use Box 5 (Medicare wages) — it can be higher because it includes pre-tax benefits that Box 1 excludes.
Box 1
✅ Use this
Taxable wages
✅ Use this
Taxable wages
Box 2
Info only
Fed tax withheld
Info only
Fed tax withheld
Box 5
⚠️ Don't use
Medicare wages (higher)
⚠️ Don't use
Medicare wages (higher)
Box 12
Review
401k, HSA, etc.
Review
401k, HSA, etc.
Red flags to note: Gap between Box 1 and Box 5 is normal (pre-tax contributions). But if the borrower's W-2 income is decreasing year over year — document and flag. Multiple W-2s from different employers in the same year = calculate each separately, then total. Two jobs with one employer = fine if same line of work.
📋 Select Pay Type
Guaranteed 40 hrs: Hourly Rate × 2,080 ÷ 12
Guaranteed hours (not 40): Hourly Rate × Avg Weekly Hrs × 52 ÷ 12
Guaranteed hours (not 40): Hourly Rate × Avg Weekly Hrs × 52 ÷ 12
Hourly rate
Weekly hours
Use 40 if guaranteed 40 hrs/wk
⚠️ If hours fluctuate, treat as variable base income — use 12-month average. Do not use guaranteed method.
Qualifying Monthly Income
—
Bi-weekly salary: Gross Pay Per Check × 26 ÷ 12
Gross pay per check (bi-weekly)
✅ Verify qualifying income is consistent with YTD earnings on paystub.
Qualifying Monthly Income
—
Variable / Overtime / Bonus / Commission: Requires 2-year history
If current year ≥ prior year → (Yr1 + Yr2) ÷ 24
If current year < prior year → Current year ÷ 12 (declining trend = use lower)
If current year ≥ prior year → (Yr1 + Yr2) ÷ 24
If current year < prior year → Current year ÷ 12 (declining trend = use lower)
Year 1 variable income — prior year (annual)
Year 2 variable income — current year (annual)
Qualifying Monthly Variable Income
—
📅 YTD Cross-Check — verify your income figure against actual paystub YTD data
YTD Monthly: YTD Earnings ÷ Months from Jan 1
YTD + 1 W2 Avg: (YTD Earnings + W2 Yr1) ÷ (Months from Jan 1 + 12)
YTD + 2 W2 Avg: (YTD Earnings + W2 Yr1 + W2 Yr2) ÷ (Months from Jan 1 + 24)
YTD + 1 W2 Avg: (YTD Earnings + W2 Yr1) ÷ (Months from Jan 1 + 12)
YTD + 2 W2 Avg: (YTD Earnings + W2 Yr1 + W2 Yr2) ÷ (Months from Jan 1 + 24)
Paystub Data
YTD Earnings ($)
Paid Through Date
Prior Year W-2s
W-2 Year 1 (most recent, annual)
W-2 Year 2 (prior year, annual)
YTD Monthly
—
YTD + W2 Yr1 Avg
—
YTD + 2 W2 Avg
—
🗺️ What Am I Looking At?
Schedule C is the profit/loss statement for a sole proprietor or single-member LLC. Think of it as a simplified business P&L. The IRS sees Line 31 (Net Profit) as what the borrower earned. But for mortgage purposes, we add back certain non-cash expenses — because those deductions reduced the tax bill but the money never actually left the bank.
What to request:
• 2 years of 1040s with Schedule C attached
• Business bank statements if income is declining
• Form 4562 (if depreciation is large)
• 2 years of 1040s with Schedule C attached
• Business bank statements if income is declining
• Form 4562 (if depreciation is large)
Red flags:
• Losses two years in a row (cannot use, may be a liability)
• Business income declining sharply year over year
• Borrower claims income but files no Schedule C
• Losses two years in a row (cannot use, may be a liability)
• Business income declining sharply year over year
• Borrower claims income but files no Schedule C
📊 Schedule C Income Calculation
Monthly = sum of [(Yr 1 + Yr 2) ÷ 2 ÷ 12] across all Schedule C businesses
📌 Must own business for 2 years with 2 years tax returns. Exception: DU auto-approval with 1 year return — must be highly qualified.
−
Biz #1
—
YEAR 1 — Most Recent
Net Profit (Schedule C, Line 31)
+Depreciation / Depletion (Sch C, Line 13 / Form 4562)
+Mileage add-back (Sch C, Line 9 — enter miles, × $0.30)
+Business use of home (Sch C, Line 30)
+Meals add-back (Sch C, Line 24b — typically 50%)
−YEAR 2 — Prior Year
Net Profit (Schedule C, Line 31)
+Depreciation / Depletion (Sch C, Line 13 / Form 4562)
+Mileage add-back (Sch C, Line 9 — enter miles, × $0.30)
+Business use of home (Sch C, Line 30)
+Meals add-back (Sch C, Line 24b — typically 50%)
−Combined Qualifying Monthly — All Businesses
—
⚠️ Mixed Year Note
If borrower has Schedule C one year and 1120S the other — calculate each year separately, then average only if it's the same business and the income trend supports it. Flag for Doug if trend is declining.
💡 Why We Add Back Depreciation & Amortization
TANGIBLE ASSETS → Depreciation
Equipment · Machinery · Buildings · Vehicles · Land
Physical — you can touch it
Physical — you can touch it
INTANGIBLE ASSETS → Amortization
Trademarks · Patents · Goodwill · Licenses · Brands
Non-physical — you can't touch it
Non-physical — you can't touch it
Both are non-cash expenses — the business expensed the asset on the return, but no cash actually left the bank account that year. The asset still has value. Since we care about cash available to repay the loan, we add these back to qualifying income.
🗺️ What Am I Looking At?
An S-Corporation is a separate legal entity that files its own tax return (Form 1120-S). The business income doesn't appear on the 1040 directly — it passes through to the owner via a K-1 form. You need both: the 1120-S (business return) AND the personal 1040. The K-1 is usually attached to the personal return.
What to request:
• 2 years personal 1040s (with K-1 attached)
• 2 years 1120-S business returns
• K-1 separately if not attached
• Schedule G or CPA letter if <25% ownership showing
• 2 years personal 1040s (with K-1 attached)
• 2 years 1120-S business returns
• K-1 separately if not attached
• Schedule G or CPA letter if <25% ownership showing
Key concept:
The borrower pays themselves a W-2 salary from the business and receives a share of the business profit via K-1. Both count toward qualifying income. The W-2 appears on the 1040; the K-1 passes through Schedule E → Schedule 1 → Line 8 of 1040.
The borrower pays themselves a W-2 salary from the business and receives a share of the business profit via K-1. Both count toward qualifying income. The W-2 appears on the 1040; the K-1 passes through Schedule E → Schedule 1 → Line 8 of 1040.
Ownership %: The K-1 shows the borrower's percentage of ownership. Income is multiplied by that %. A 50% owner of a business earning $200K gets $100K K-1 income. If ownership isn't clear on the return, request a Schedule G (1120-S) or a CPA letter confirming ownership percentage.
🏢 1120S — K-1 Income Calculation
Annual = K-1 Line 1 + W-2 Box 5 + (Depr × Own%) + (Amort × Own%) − (Sch L × Own%) − (Meals × Own%)
Monthly = [(Yr 1 + Yr 2) ÷ 2] ÷ 12
K-1 Line 1 is already the owner's allocated share. Dep/Amort/SchedL/Meals are raw 1120-S amounts — ownership% applied automatically.
Monthly = [(Yr 1 + Yr 2) ÷ 2] ÷ 12
K-1 Line 1 is already the owner's allocated share. Dep/Amort/SchedL/Meals are raw 1120-S amounts — ownership% applied automatically.
📌 Fiscal year note: If the business uses a fiscal year, prior-year business K-1 pairs with next personal return (e.g., 2023 business → 2024 personal). K-1 dates will tell you. Confirm with client.
Ownership %
YEAR 1 — Most Recent
Months in Service
K-1 Line 1 (Ordinary Business Income)
+W-2 wages from business (W-2, Box 5 — Medicare wages)
+Depreciation / Depletion (1120-S Line 14 + 8825 — enter raw amount, ownership% applied)
+Amortization (1120-S Box 17 AD — enter raw amount, ownership% applied)
+Schedule L Line 17(d) — enter raw amount, ownership% applied
−Travel & Entertainment (Sch M-1 Line 3b — enter raw amount, ownership% applied)
−Year 1 Qualifying Annual
YEAR 2 — Prior Year
Months in Service
K-1 Line 1 (Ordinary Business Income)
+W-2 wages from business (W-2, Box 5 — Medicare wages)
+Depreciation / Depletion (1120-S Line 14 + 8825 — enter raw amount, ownership% applied)
+Amortization (1120-S Box 17 AD — enter raw amount, ownership% applied)
+Schedule L Line 17(d) — enter raw amount, ownership% applied
−Travel & Entertainment (Sch M-1 Line 3b — enter raw amount, ownership% applied)
−Year 2 Qualifying Annual
Averaging Method
Qualifying Monthly Income
—
🧪 Schedule L — Liquidity Test
Assets: Lines 1 + 2 + 3 must be > Liabilities: Lines 16 + 17 + 18
If FAIL → use lower of K-1 Line 1 vs Line 16(d)
If FAIL → use lower of K-1 Line 1 vs Line 16(d)
Assets
Schedule L, Line 1 (Cash)
+Schedule L, Line 2 (Receivables)
+Schedule L, Line 3 (Other liquid assets)
+Liabilities
Schedule L, Line 16
−Schedule L, Line 17
−Schedule L, Line 18
−📊 Schedule E Page 2 — How Business Income Accumulates
Schedule E Page 2 is where Partnership K-1s and S-Corp K-1s are listed. The IRS combines all of them — their net income flows to Schedule 1 Line 5, which then hits 1040 Line 8.
Net Partnership Income (K-1 1065 × ownership%) → Sch E Pg 2, Line 32
Net S-Corp Income (K-1 1120-S × ownership%) → Sch E Pg 2, Line 32
Net Rental Income (Sch E Pg 1, Line 26)
─────────────────────────────
Schedule E Line 41 (Grand Total) → Schedule 1 Line 5 → 1040 Line 8
Net S-Corp Income (K-1 1120-S × ownership%) → Sch E Pg 2, Line 32
Net Rental Income (Sch E Pg 1, Line 26)
─────────────────────────────
Schedule E Line 41 (Grand Total) → Schedule 1 Line 5 → 1040 Line 8
⚠️ The IRS compares amounts reported on your 1040 against amounts shown on individual K-1s. If they don't match, expect underwriter questions or a 4506-C request.
🗺️ What Am I Looking At?
Schedule E Page 1 lists rental property income and expenses. Each property gets its own section. The IRS nets everything down to a bottom-line gain or loss per property — but for mortgage qualifying, we can't just use that number. We start fresh: take gross rent, subtract real expenses, then add back items the IRS lets them deduct that aren't actual cash costs (depreciation, mortgage interest, taxes, insurance — since those are already in the borrower's PITI).
Why we add back mortgage interest & taxes:
These show as expenses on the return — but the rental property's PITI payment is already being counted in the borrower's total liabilities (DTI). Adding them back avoids double-counting against the borrower.
These show as expenses on the return — but the rental property's PITI payment is already being counted in the borrower's total liabilities (DTI). Adding them back avoids double-counting against the borrower.
Negative cash flow rule:
If the rental income doesn't cover the mortgage payment, the difference becomes a monthly liability on the borrower's DTI — the same as a car payment or credit card. It works against them.
If the rental income doesn't cover the mortgage payment, the difference becomes a monthly liability on the borrower's DTI — the same as a car payment or credit card. It works against them.
🏘 Rental Income — Schedule E
Monthly Net = (Gross Rent − Line 20 Expenses + Add-backs) ÷ Months Rented
Cash Flow = Monthly Net − Mortgage Payment − HOA
Cash Flow = Monthly Net − Mortgage Payment − HOA
Months rented (use 12 if full year)
Adjust if not rented full year
Income & Add-Backs
Gross Rent (annual) (Sch E, Line 3)
+Depreciation add-back (Sch E, Line 18)
+Property Taxes add-back (Sch E, Line 16)
+Mortgage Interest add-back (Sch E, Line 12)
+Insurance add-back (Sch E, Line 9)
+HOA Dues add-back (Sch E, Line 19)
+Schedule E Line 20 (Total Expenses)
−Monthly Net Rental Income
Cash Flow Test
Monthly Mortgage Payment on rental
−Monthly HOA on rental
−Monthly Net Cash Flow
—
✅ Rental Property Review Checklist
Ask these questions for every rental property before qualifying the income. Inconsistencies = document and flag.
| # | Question | Why It Matters |
|---|---|---|
| 1 | When was the property acquired? | Must appear on 2 years of returns; new acquisitions need 2-yr history |
| 2 | Do signed leases exist? | Verifies rental is active and at market; required if Sch E shows rental income |
| 3 | Is it still owned? If not, when sold? | Can't use income from a property that's been sold |
| 4 | Is income consistent year-over-year? | Large swings in rents or expenses = underwriting scrutiny; declining = use lower year |
| 5 | Any new properties since last tax return? | Won't appear on returns yet — may need different documentation path |
📌 1031 Exchange note: If borrower sold a rental and bought a replacement property via 1031 exchange, the deferred gain is NOT income — it does not appear on the return as taxable income. Do not include it in qualifying calculations.
🗺️ How to Read a 1040 — Start Here
Form 1040 is the borrower's annual federal tax return. It's a one or two-page summary that pulls income from every other form and schedule into a single total. Think of it as the table of contents — you'll still need to go to the supporting schedules for details, but the 1040 tells you what categories of income exist and approximately how much.
What to do first: Flip to Schedule 1 (attached behind the 1040). Line 8 on the 1040 pulls from Schedule 1 Line 10 — which is where all self-employment, rental, and business income lands. If Line 8 is blank or small and the borrower claims to be self-employed, something is wrong.
Lines 1a–1z: W-2 wages (one or more employers)
Lines 2b, 3b: Interest and dividends (Schedule B)
Lines 4b, 5b: IRA / pension distributions (1099-R)
Lines 6a/6b: Social Security — see SS guide below
Lines 2b, 3b: Interest and dividends (Schedule B)
Lines 4b, 5b: IRA / pension distributions (1099-R)
Lines 6a/6b: Social Security — see SS guide below
Line 7: Capital gains (Schedule D) — often one-time
Line 8: Schedule 1 — ALL self-employment, rental, business
Line 9: Total income — the grand total
Line 11: AGI — after adjustments, use for verification
Line 8: Schedule 1 — ALL self-employment, rental, business
Line 9: Total income — the grand total
Line 11: AGI — after adjustments, use for verification
📌 Social Security — How to Know If It's Taxable
Look at Lines 6a and 6b side by side.
Line 6a = Gross SS benefit (total amount received from Social Security)
Line 6b = Taxable portion (what the IRS makes them pay tax on)
Line 6a = Gross SS benefit (total amount received from Social Security)
Line 6b = Taxable portion (what the IRS makes them pay tax on)
6b = $0 or blank
SS is fully non-taxable — gross up the entire 6a amount by 25%
6b < 6a
SS is partially taxable — gross up only the non-taxable portion (6a − 6b)
6b = 6a
SS is fully taxable — no gross-up allowed; use 6a as-is
Why does this happen? The IRS uses "combined income" (AGI + tax-exempt interest + ½ of SS) to determine taxability.
• Single filer: Under $25,000 combined → 0% taxable. $25K–$34K → up to 50% taxable. Over $34K → up to 85% taxable.
• Married filing jointly: Under $32,000 → 0% taxable. $32K–$44K → up to 50%. Over $44K → up to 85%.
• The maximum SS that can ever be taxable is 85% — the remaining 15% minimum is always non-taxable.
• Practical shortcut: High earners (large W-2, business income) → expect 6b ≈ 6a. Retired-only income → often 6b is $0 or much less than 6a.
• Single filer: Under $25,000 combined → 0% taxable. $25K–$34K → up to 50% taxable. Over $34K → up to 85% taxable.
• Married filing jointly: Under $32,000 → 0% taxable. $32K–$44K → up to 50%. Over $44K → up to 85%.
• The maximum SS that can ever be taxable is 85% — the remaining 15% minimum is always non-taxable.
• Practical shortcut: High earners (large W-2, business income) → expect 6b ≈ 6a. Retired-only income → often 6b is $0 or much less than 6a.
📐 Gross-up formula: Non-taxable SS ÷ 0.80 = grossed-up amount (same as multiplying by 1.25). Always verify the guideline — some lenders allow grossing up the full SS benefit if 6b = $0.
Total SS Gross Benefit (annual) 1040 Line 6a
Taxable SS Amount (annual) 1040 Line 6b
Gross-up rate Typically 25% — verify with guidelines
Qualifying Monthly SS Income
—
📈 Capital Gains & Investment Income
⛔ One-Time Capital Gains (Schedule D, Line 7): If borrower sold an investment property or assets and shows a large capital gain — this is a one-time event and cannot be used as qualifying income. Note for client: "Should've done a 1031 Exchange."
On-Going Investment / Capital Gains Income
If borrower has 2+ years of recurring capital gains/dividends from investment accounts, and the account balance remains after the purchase, you may use the adjusted asset × ROI%.
Total investment account balance
Amount used for down payment / closing costs
Expected annual ROI % Use historical return from tax returns
Qualifying Monthly Investment Income
Verify with guideline — some allow only % of assets or a reduced ROI
—
📑 Form 1040 — Income Line Map
Use this as a quick reference when reviewing a borrower's 1040. Each line below shows where income is reported and which supporting schedule feeds it.
| 1040 Line | Income Type | Source / Notes |
|---|---|---|
| 1a | W-2 Wages | W-2, Box 1 — each employer separately |
| 1z | Total Wages (sum) | Add 1a through 1h |
| 2b | Taxable Interest | Schedule B, Line 4 — generally not qualifying income |
| 3b | Ordinary Dividends | Schedule B, Line 6 — generally not qualifying income |
| 4b | IRA Distributions (taxable) | Form 1099-R — taxable amount only; check if recurring |
| 5b | Pensions & Annuities (taxable) | Form 1099-R — can qualify if recurring for 3+ yrs |
| 6a / 6b | Social Security Benefits | 6a = gross; 6b = taxable. Use gross (6a) for qualifying — may gross up 125% if non-taxable |
| 7 | Capital Gain / (Loss) | Schedule D — only qualifying if 2-year history & likely to continue |
| 8 | Other Income (Schedule 1, Line 10) | This is where Sch C, Sch E, K-1, and partnership income roll up to |
| 9 | Total Income | Sum of 1z + 2b + 3b + 4b + 5b + 6b + 7 + 8 |
| 10 | Adjustments (Schedule 1, Line 26) | SE tax, student loan interest, HSA deductions, etc. |
| 11 | Adjusted Gross Income (AGI) | Line 9 minus Line 10 — cross-check with lender's qualifying income |
| 15 | Taxable Income | After standard/itemized deductions — useful for tax bracket analysis |
📊 Schedule 1 — Where Self-Employment Income Flows
Schedule 1 is the bridge between supporting schedules and the main 1040. All business/rental/self-employment income passes through here before landing on 1040 Line 8.
| Sch 1 Line | Income Type | Comes From |
|---|---|---|
| 3 | Business Income (Sch C) | Schedule C, Line 31 (net profit) — sole proprietor/freelancer |
| 5 | Rental / Partnership / S-Corp | Schedule E, Line 26 (rentals) and Line 41 (partnerships & S-Corps) |
| 7 | Farm Income | Schedule F — not common for residential mortgage files |
| 8 | Other Income | Social Security, gambling, other — see sub-lines |
| 10 | Total Additional Income | Sum of Lines 1–9 → flows to 1040 Line 8 |
🏢 Schedule E — Where Business Income Flows
| Sch E Line | What It Shows | Notes |
|---|---|---|
| Page 1 | Rental Real Estate & Royalties | Each property listed separately — analyze each independently |
| Line 3 | Rents Received (per property) | Gross rental income before expenses |
| Line 18 | Depreciation (per property) | Add back to qualifying income |
| Line 20 | Total Expenses (per property) | Verify against lease agreements if possible |
| Line 21 | Net Income / (Loss) per property | Starting point — then add back depreciation |
| Line 26 | Total Rental Income/Loss (Page 1) | Feeds to Schedule 1, Line 5 |
| Page 2 — Part II | Partnerships & S Corporations | List of K-1 entities |
| Line 28 | Entity list with income/loss columns | Nonpassive income from K-1 goes in column (k) |
| Line 32 | Total Partnership & S-Corp Income | Feeds to Schedule 1, Line 5 combined with rental |
| Line 41 | Grand Total Schedule E | All rental + partnership + S-Corp → Schedule 1, Line 5 |
📋 K-1 Line Reference
K-1 (Form 1120-S) — S Corporation
| Box | What It Is |
|---|---|
| Box 1 | Ordinary Business Income / (Loss) |
| Box 2 | Net Rental Real Estate Income |
| Box 11 | Section 179 Deduction (subtract) |
| Box 12 | Other Deductions (may include meals) |
| Box 17 AC | Depreciation — add back |
| Box 17 AD | Amortization — add back |
K-1 (Form 1065) — Partnership
| Box | What It Is |
|---|---|
| Box 1 | Ordinary Business Income / (Loss) |
| Box 4 | Guaranteed Payments — add to income |
| Box 9a | Net Long-Term Capital Gain |
| Box 13 W | Other Deductions — check for depreciation |
| Box 19 | Distributions — not qualifying income |
| Box 20 Z | Section 199A information (QBI deduction) |
🔍 How to Identify Income Type From the Return
Before you calculate anything, you need to know what kind of income you're looking at. Use this guide when you open a tax return cold.
| If you see this on the 1040... | Income type is... | Go to this tab |
|---|---|---|
| Lines 1a–1z have dollar amounts, and borrower has W-2s | Wages / Salary | 📋 W-2 / Paystub |
| Line 8 has a number AND Schedule 1 shows Line 3 (Sch C) | Self-employed / sole prop | 📊 Schedule C |
| Line 8 has a number AND Schedule 1 shows Line 5 from Sch E | Rental income or business K-1 | 🏘 Rental or 🏢 S-Corp |
| K-1 form attached — Form 1120-S in the header | S-Corporation | 🏢 S-Corp (1120S) |
| K-1 form attached — Form 1065 in the header | Partnership (1065) | 🏢 S-Corp tab (use K-1 calc) |
| Lines 6a and 6b both have amounts | Social Security | 📑 Form 1040 → SS calc |
| Lines 4b or 5b have amounts | IRA / Pension / Annuity | 📑 Form 1040 → Line Map |
| Line 7 has a large one-time number | Capital gain — likely one-time | 📑 Form 1040 → Capital Gains |
| Schedule B attached with recurring amounts | Interest / Dividends | Reference only (rarely qualifying) |
🚩 Underwriter Red Flags — What Triggers Questions
| What you see | What the underwriter will ask |
|---|---|
| Income declining year over year (any type) | Why is it declining? Use the lower year. May be declined. |
| Large Schedule D capital gain (Line 7) | Is this one-time? Verify Schedule D — likely not qualifying. |
| Business income on 1040 but no business return attached | Need 1120-S or 1065 and K-1s to verify. |
| Schedule C shows a loss | Losses add to liabilities — can tank DTI. |
| Multiple Schedule E properties, some with losses | Each property is analyzed separately. Losses offset qualifying income. |
| Line 37 (1040 Page 2) shows taxes owed | Are taxes actually paid? Unpaid tax liabilities are a lien risk. |
| W-2 Box 1 much lower than Box 5 | Normal (pre-tax benefits) — but verify with paystub YTD. |
| Schedule 1 Line 8 is large with no explanation | What is it? Look at Schedule 1 sub-lines to identify source. |
📖 Quick Reference
| Income Type | Min History | Docs Needed |
|---|---|---|
| W-2 Salary / Hourly (guaranteed hrs) | Current | 2 most recent paystubs + W-2s |
| Overtime / Bonus / Commission | 2 Years | Paystubs + 2 yrs W-2s |
| Schedule C (Sole Prop) | 2 Years | 2 yrs 1040 with Sch C; business 2 yr history |
| S-Corp (1120S / K-1) | 2 Years | 2 yrs personal + business returns, K-1s |
| Rental Income (Schedule E) | 2 Years | 2 yrs 1040 with Sch E; lease agreements |
| Retirement / Pension | Award Letter | Award letter or 1099-R |
| VA / Social Security Disability | Award Letter | Award letter — gross up 125% if non-taxable |
| 2 W-2 Jobs | 2 Years | Must have 2-yr history at BOTH jobs |
📐 Common Formulas
| Scenario | Formula |
|---|---|
| Hourly (40 hrs guaranteed) | Rate × 2,080 ÷ 12 |
| Hourly (variable hrs) | Rate × Avg Hrs × 52 ÷ 12 |
| Bi-weekly salary | Check × 26 ÷ 12 |
| Variable / bonus (2yr) | (Yr1 + Yr2) ÷ 24 |
| Mileage add-back | Miles × $0.26 |
| Retirement (if used) | Avg over 2 yrs from return |
| Asset depletion | Assets ÷ 36 = monthly (must continue 3 yrs) |