If you're self-employed, you probably deduct everything the tax law allows. That keeps your taxes down, and it also makes your income look lower on paper. Lenders use a cash flow analysis that adds certain deductions back before they count your income.
The write-offs a lender adds back
| Schedule C line | What it is | What the lender does |
|---|---|---|
| Line 31 | Net profit or loss | The starting number |
| Line 12 | Depletion | Adds it back |
| Line 13 | Depreciation | Adds it back |
| Part IV, line 44a | Business miles on the standard mileage rate | Adds back the depreciation part of the rate |
| Line 30 | Business use of your home | Adds it back |
| Part V | Amortization and casualty losses | Adds them back |
| Line 24b | Deductible business meals | Subtracts the half you couldn't deduct |
These are the adjustments on Fannie Mae's Form 1084 for a Schedule C. FHA reads the same tax return with its own rules, and a lender can run both.
Business miles on the standard mileage rate
When you take the standard mileage rate, the IRS builds depreciation into each mile. That part comes back as income on a Conventional loan. Multiply your business miles by the rate for that tax year.
| Tax year | Depreciation part of the standard mileage rate |
|---|---|
| 2023 | 28 cents a mile |
| 2024 | 30 cents a mile |
| 2025 | 33 cents a mile |
| 2026 | 35 cents a mile |
A rideshare driver with 31,000 business miles on a 2025 return adds back $10,230 a year, about $853 a month.
A worked example
A delivery driver files Schedule C with $24,000 of net profit and 31,000 business miles. The year before showed $22,000 and the same miles.
- Latest year: $24,000 plus $10,230 for miles is $34,230.
- Year before: $22,000 plus $9,300 for miles (30 cents) is $31,300.
- Income went up, so the lender averages the two: $32,765 a year, or about $2,730 a month.
- The tax return alone shows about $1,917 a month over the same two years.
That extra $813 a month can mean about $56,000 more house with FHA at 3.5% down and a 5.75% rate.
One year or two
Two years of tax returns is the standard. One year can work when you did the same kind of work for at least two years before you went out on your own, and your latest return shows a full year of it. When income dropped from one year to the next, lenders use the lower, latest year. A drop of 20% or more gets a closer look and a short written explanation.
What to have ready
- Your last two federal tax returns, all pages, with Schedule C
- Your 1099s for the same years
- A year-to-date profit and loss statement if it's been a while since your last return
- Two recent bank statements
Where this number goes
Use the monthly figure for this income when the approval calculator asks for your monthly pay, and add any W-2 pay on top. If your returns include an S-corp, partnership or more than one business, call AAA Capital Funding at 888-601-8344 and we'll read them with you.