How to calculate 1099 income for mortgage?

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Calculating 1099 income for a mortgage is an essential step in the home buying process for individuals who are self-employed or receive income from freelance work. Unlike traditional employees who receive a W-2 form, self-employed individuals often receive a 1099 form, which reports their income to the Internal Revenue Service (IRS). Determining how to calculate this income accurately is crucial for mortgage lenders to assess an applicant’s financial stability and eligibility for a home loan.

Understanding 1099 Income

What is a 1099 form? A 1099 form is used to report various types of income, such as self-employment income, freelance earnings, or income from rental properties. It is issued by businesses or clients who have paid an individual more than $600 in a tax year. The form provides information about the income received, allowing the recipient to report it on their tax return.

Types of 1099 forms: There are several types of 1099 forms, including 1099-MISC, 1099-NEC, and 1099-K. The most common form used for self-employment income is the 1099-MISC, which reports non-employee compensation. The 1099-NEC is specifically for reporting independent contractor income, while the 1099-K is used for reporting income from payment processors like PayPal.

Calculating 1099 Income for Mortgage

Review your 1099 forms: Start by gathering all your 1099 forms for the tax year in question. These forms should provide a breakdown of your income, including any expenses or deductions that may be applicable.

Calculate gross income: To calculate your gross income, add up the total income reported on all your 1099 forms. This includes any income from self-employment, freelance work, or rental properties. It is crucial to include all sources of income accurately.

Consider expenses and deductions: Self-employed individuals can deduct certain business expenses from their gross income to arrive at their net income. These deductions may include expenses such as office supplies, travel costs, or advertising expenses. Subtracting these deductions from your gross income will give you your net income.

Use tax returns: Mortgage lenders often require self-employed individuals to provide their tax returns as part of the application process. Your tax returns will provide a comprehensive overview of your income, expenses, and deductions. Lenders may use the net income reported on your tax returns to assess your eligibility for a mortgage.

Debt-to-income ratio: Mortgage lenders also consider a borrower’s debt-to-income ratio (DTI) when evaluating their loan application. Your DTI is calculated by dividing your total monthly debt payments by your gross monthly income. Including your 1099 income in this calculation is crucial to determine if you meet the lender’s requirements.


Calculating 1099 income for a mortgage involves reviewing your 1099 forms, calculating your gross and net income, considering expenses and deductions, and utilizing your tax returns. It is essential to provide accurate and detailed information to mortgage lenders to ensure a smooth application process. Understanding the requirements and guidelines for calculating 1099 income will help self-employed individuals navigate the mortgage application process successfully.


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