Enter the return figures
Year 1 is the most recent tax year. Leave a line at zero when it does not apply. Enter positive numbers; the worksheet applies the sign shown by the label, so a deduction line subtracts automatically.
Averaged over both years entered.
- Year 1 total
- $0
- Year 2 total
- $0
- Income used
- $0
- Year over year
- Not calculated
How to work it
Start with the most recent tax year in the Year 1 column and the prior year in Year 2. Enter positive figures throughout. Lines that reduce income are labelled as deductions and are subtracted for you, which keeps the sign convention out of the reviewer’s head and out of the finding.
Enter only the borrower’s share on the business lines. A borrower who owns forty percent of a partnership does not bring one hundred percent of its depreciation to the worksheet, and this is where two reviewers most often produce two different numbers from the same file.
Choose the averaging period last. Twelve months uses Year 1 alone; twenty-four months averages both. That choice is a documented underwriting decision, not a default, and the reason for it belongs in the file next to the result.
What it does not decide
It does not read returns, apply an agency’s add-back rules, test whether the business can sustain a withdrawal, judge whether a declining trend is acceptable, or determine how many years of returns the loan requires. Those are guide and policy questions. The current Fannie Mae or Freddie Mac requirements control, and where the two disagree the worksheet cannot resolve it for you.
It also does not verify anything. A clean total built on a return the IRS has no record of is worse than an arithmetic error, which is why the calculation and the tax transcript are two halves of one control.
Make the result reperformable
A qualifying income figure is only defensible if another reviewer can start from the same returns and land on the same number. Keep the entity and year of every return used, the ownership percentage, each add-back with the schedule and line it came from, the averaging period and its rationale, and the evidence supporting access to business income. Record the final monthly figure and the ratio it fed.
When a post-close reviewer recalculates and lands somewhere else, the finding should state both figures, the specific line that differs, and the guide section that governs it. See the post-closing QC checklist for where this sits in the cycle, or how ExactClose preserves the calculation beside the source page.
Keep decisions human and evidence explicit.
This worksheet totals what you enter. It does not read a return, decide which add-backs an agency permits, or determine whether business income is available to the borrower.