How is Capital Gains Income Calculated? (IRS Form 1040, Schedule D)

Schedule D – Capital Gains (& Exception for Losses)

If your borrower mentions having capital gains they want to use for qualification, but you’re unsure where to locate this information, refer to our How Is This Income Calculated Tutorials!

Both Fannie Mae and Freddie Mac mandate a recent 2-year history of the income’s receipt. This can be established using copies of signed federal income tax returns or year-end account statements.

To identify income on Federal Tax Returns, consult Schedule D. This is where the Capital Gains are documented.

  1. Find the Recurring Capital Gains (or Loss) on Schedule D (Schedule D, Page 2, Line 16) in the first year of returns. This is the subtotal for that first year of returns.
  2. Repeat step 1 for the second set of tax returns. 
  3. Add both year subtotals and divide by 24 months. This resulting total represents your monthly qualifying income*.

*Please note if your monthly qualifying income is negative, then this income will be dropped

For more information about documentation requirements and income qualifiers for Schedule D Capital Gains (or Loss), we encourage you to review the Fannie Mae and Freddie Mac guidelines.