Self-Employed Income Calculator
Estimate the qualifying income a lender would use from your tax returns, including common add-backs like depreciation.
By Onias Derilus, Mortgage Capital · NMLS# 1859012 · Last Updated: June 2026
Lenders average two years of net profit and add back non-cash deductions like depreciation. Declining income may be capped at the lower year. Estimate only.
When you are self-employed, lenders calculate qualifying income from your tax returns, not your gross revenue. They typically average the last two years of net profit and add back certain non-cash deductions.
Depreciation, depletion, and some one-time expenses can be added back because they reduce taxable income without reducing cash flow. This often raises your qualifying income above the bottom line on your return.
How to Use This Calculator
- 1
Enter your net profit from the most recent tax year.
- 2
Enter your net profit from the prior year.
- 3
Add the annual depreciation you can add back, found on your Schedule C or business return.
- 4
Read the qualifying monthly income the lender would likely use.
The Formula & Assumptions
Add-backs = depreciation × 2 years
Two-year total =
year1 + year2 + add-backs
Qualifying = two-year total ÷ 2 ÷ 12
Lenders average two years of net profit to smooth out the swings common in self-employment, then add back non-cash deductions like depreciation that lowered your taxable income but not your cash.
If your income is declining year over year, many lenders use the lower or most recent year instead of the average, so a downward trend can reduce your qualifying figure.
This is a simplified version of the full analysis, which also considers business structure, ownership percentage, and other add-backs. A complete review of your returns gives the precise number.
Frequently Asked Questions
How do lenders calculate self-employed income?
They typically average your net profit over the last two years of tax returns and add back non-cash deductions such as depreciation. The result becomes your qualifying income for the debt-to-income ratio.
What can be added back to my income?
Common add-backs include depreciation, depletion, amortization, and certain non-recurring expenses. These reduced your taxable income on paper but did not cost you cash, so lenders restore them.
What if my income dropped last year?
When income is declining, many lenders use the lower or most recent year rather than the two-year average. A stable or rising trend is more favorable and can let them use the higher average.
What if my tax returns show very little income?
If write-offs make your net profit too low to qualify, a bank statement loan that uses deposits instead of returns may give a higher qualifying income. Compare both approaches.
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Rates are illustrative only. APR and payments vary by credit score, loan amount, and market conditions. Subject to credit approval. Not a commitment to lend. NMLS# 1859012. Equal Housing Lender.