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Self-employment income…can you add it, too?

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Desperate for more qualifying income? Do you go flipping the pages of the tax return to see if there is more income, anything at all, you didn’t notice the first time?

Ah! Schedule SE has self-employed earnings you did not use yet. There is no Schedule C so this must be something else. Can you add it?

Probably not.

Yes, self-employment income on Schedule SE comes from Schedule C, and Schedule F (Farm). But it also is generated when your borrower has pass-through income from an LLC or Partnership.

You should already have picked up the cashflow from those entities, either by

  • using the K-1 actual cashflow to the partner/owner or
  • factoring into the personal analysis what those other entities can afford to pay.

Good try though!

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 www.LendersOnlineTraining.com, she speaks at banking associations on risk management, lending and director finance topics.