How are Interest and Dividend Income Calculated? (Form 1040, Schedule B)
Schedule B – Interest & Dividends
If your borrower mentions having interests and dividends 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 B. This is where Interest and Dividends from Self-Employment are documented.
- Locate Recurring Interest Income (Schedule B, Line 1, or on the 1040, Line 2b) in the first year of returns.
- Add Recurring Dividend Income (Schedule B, Line 5, or on the 1040, Line 3b) from the same year to obtain the subtotal.
- Repeat steps 1 and 2 for the second set of tax returns.
- Add both year subtotals and divide by 24 months. This resulting total represents your monthly qualifying income.
For more information about documentation requirements and income qualifiers for Schedule B Interest & Dividends, we encourage you to review the Fannie Mae and Freddie Mac guidelines.
