source:
  type: guide
  id: fnma-sel-b3-3.6-02
  authority: Fannie Mae Selling Guide B3-3.6-02 — Income Reported on IRS Form 1040
  description: Fannie Mae Selling Guide B3-3.6-02 — Income Reported on IRS Form 1040.
  coverage_tier: operative
obligations:
- id: fnma-sel-b3-3.6-02-full
  canonical_id: fnma-sel-b3-3.6-02-full
  section: Fannie Mae Selling Guide B3-3.6-02 — Income Reported on IRS Form 1040
  type: do
  tags:
  - regulator-direct
  - fnma
  - selling-guide
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: Fannie Mae Selling Guide B3-3.6-02 — Income Reported on IRS Form 1040
    source_class: fnma-guide
    source_url: https://singlefamily.fanniemae.com/media/document/pdf/selling-guide
    snapshot_id: 5f7b8b79da595d76
    fetched_at: '2026-05-25T14:09:57Z'
    content_hash: sha256:98cf85a02861bbe84914a0e339b327c8fc131869a8a573882007bbeea60c5701
    paragraph_quote: 'B3-3.6-02, Income Reported on IRS Form 1040 (05/15/2012) Introduction
      This topic contains information on income reported on IRS Form 1040, including:
      Overview Wages, Salary, and Tips Interest and Dividend Income State and Local
      Tax Refunds Alimony Received IRA Distributions, Pensions and Annuities, and
      Social Security Beneﬁts Unemployment Compensation Other Income (or Loss) Overview
      To get an accurate picture of the borrower’s cash ﬂow, the lender will need
      to make certain adjustments to some of the income (or loss) that the borrower
      reported on IRS Form 1040 since it may not be recurring income. The lender also
      may need to further analyze the accompanying tax schedules or supplemental tax
      forms. Published May 6, 2026 374 This section describes how the lender should
      treat various components of the income (or loss) that a self- employed borrower
      reported on IRS Form 1040 in its cash ﬂow analysis. Note: Eligibility criteria
      for accepting income from speciﬁc non-business sources is generally the same
      as that for salaried or commissioned borrowers (see B3-3.1-01, General Income
      Information). Wages, Salary, and Tips If an amount is shown for wages, salary,
      or tips for a self-employed borrower, it may mean: the borrower operates as
      a corporation and pays himself or herself a salary or the borrower’s spouse
      is employed and receives a salary (either from the borrower’s business or from
      another employer). If the income relates to the borrower’s spouse who is employed
      by another company and the income will be used in qualifying for the mortgage,
      the spouse’s income must be veriﬁed directly with their employer since it may
      be more appropriate to use the spouse’s current earnings in underwriting the
      mortgage. Any income that is based on current earnings or that will not be used
      for qualifying purposes should be deducted from the borrower’s cash ﬂow. Interest
      and Dividend Income The taxable interest and dividend income that is reported
      on IRS Form 1040, Schedule B, may be counted as stable income only if it has
      been received for the past two years. However, the income cannot be counted
      if the borrower is using the interest-bearing or dividend-producing asset as
      the source of the down payment or closing costs. Any taxable interest or dividend
      income that is not recurring must be deducted from the borrower’s cash ﬂow.
      Tax-exempt interest income may be counted as stable income only if it has been
      received for the past two years and is expected to continue. If so, this income
      can be added to the borrower’s cash ﬂow. State and Local Tax Refunds Taxable
      state and local tax refunds, credits, or oﬀsets of state and local income taxes
      should not be used as qualifying income since the income was accounted for in
      the previous year’s tax returns. Therefore, the borrower’s cash ﬂow must be
      adjusted accordingly. Alimony Received Alimony may be accepted as qualifying
      income if it meets the requirements described in B3-3.4-02, Alimony, Child Support,
      Equalization Payments, or Separate Maintenance. Any reported alimony received
      that is determined to be nonrecurring must be deducted from the borrower’s total
      income reported on IRS Form 1040. Published May 6, 2026 375 IRA Distributions,
      Pensions and Annuities, and Social Security Beneﬁts Income received from IRA
      distributions, pensions, annuities, and Social Security beneﬁts may be accepted
      as qualifying income. See B3-3.4-03, Annuity, Pension, or Retirement Income
      or B3-3.4-15, Social Security Income, for speciﬁc requirements. The nontaxable
      portion of such recurring income must be added to the borrower’s cash ﬂow. The
      tax-exempt portion of income from these sources may be increased to reﬂect the
      tax savings, as described in B3-3.1-01, General Income Information. If the income
      from these sources is determined to be nonrecurring, the income must be deducted
      from the borrower’s cash ﬂow. Unemployment Compensation Unemployment compensation
      may be considered as acceptable qualifying income if it meets the requirements
      described in B3-3.4-17, Unemployment Beneﬁts Income. Any reported unemployment
      compensation that is determined to be nonrecurring must be deducted from the
      borrower’s cash ﬂow. Other Income (or Loss) If the borrower reported income
      from other sources, the lender must verify that the income is an eligible source
      for qualifying purposes per the requirements described in Chapter B3-3, Income
      Assessment, for the applicable income source. Income that is determined to be
      nonrecurring or ineligible for qualifying purposes must be deducted from the
      borrower’s cash ﬂow. If the borrower reported any nonrecurring losses, the borrower’s
      cash ﬂow should be increased by the amount of the losses. Recent Related Announcements
      There are no recently issued Announcements related to this topic.'
  judgment: false
