How can we help? Call us at 360-455-1569 or email

Nontaxed income to add back… a sad tale!

One of ‘my’ lenders (and by that I mean one who has come to my tax return analysis training and kept in touch) ran into a very hard brick wall last month trying to get a loan past an underwriter.

His borrower is a Minister and in addition to her salary, receives a minister’s housing allowance. The underwriter is counting the housing cost against her but is not giving credit for the housing allowance. The borrower has evidence of receipt for the last six years.
Minister housing allowance is nontaxed and should be added to other cashflow to determine borrower credit-worthiness.

The underwriter says no!


So I did some research to find the specific IRS publication that explains the documentation needed. The church needs to provide in a written contract the break-out between the salary and the housing allowance.

I looked in the FannieMae rules to find the instructions for counting all manner of nontaxed income. It does not stop at child support received.

So here is my ‘long’ list, and undoubtedly there are even more:

  1. Child support received
  2. Foster care payments received
  3. Wages if set aside in deferred comp (contributions are optional)
  4. Wages paid to active-duty military in Iraq or Afghanistan
  5. Tax-exempt interest
  6. Untaxed portion of Social Security received
  7. Untaxed portion of IRA distributions
  8. Untaxed portion of Pension distributions
  9. Some disability income
  10. A portion of contracts or notes receivable (get the contract)
  11. Sales on a Native American Reservation
  12. Gifts (may be taxed to the giver)
  13. Life Insurance proceeds
  14. Reindeer Herd Income (or so a lender from Alaska told me…I did not check this one out.)
  15. And yes, Minister Housing Allowance!

I am not suggesting that you assume that all of these are easily documented or even recurring. Gifts might be a hard sell. Contracts receivable may only be another few months.  Child support received quits at age 18 typically.

But minister housing allowance with adequate proof? Give me a break!

What else is on your list?

About the Author
Linda Keith CPA is an expert in credit risk readiness and credit analysis. She trains banks and credit unions throughout the United States, both in-house and in open-enrollment sessions, on Tax Return and Financial Statement Analysis. She is in the trenches with lenders, analysts and underwriters helping them say "yes" to good loans. Creator of the Tax Return Analysis Virtual Classroom at, she speaks at banking associations on risk management, lending and director finance topics.