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Sometimes one year of tax returns is permitted, but a stronger recent year does not let a borrower choose the more favorable calculation. The lender must establish the applicable documentation eligibility and analyze usable income.
What the review compared
I requested a tax-return review, and a colleague compared one-year income with a two-year average after a depreciation adjustment. The exchange also questioned whose W-2 wages were included. That second question mattered just as much as the arithmetic.
This was a calculation discussion, not proof that the higher figure had been accepted for approval.
Check the eligibility before the math
Fannie Mae permits one year of personal and business returns under specified conditions. These include a business existing for five years and the borrower holding at least 25% ownership for five consecutive years, supported by the required evidence. Each business is assessed separately, and a written cash-flow analysis is required.
Business age alone is insufficient. Having one year of documents accepted also does not mean every dollar on the return becomes qualifying income. Ask the lender to confirm the full requirements for your program.
Reconcile the income components
Have the reviewer identify wages, business income, allowable adjustments and any items that may already be reflected elsewhere. A depreciation adjustment is not a reason to add back every business expense. The treatment needs support in the applicable analysis.
Ask for the calculation the lender actually accepts, not just alternative totals from an early worksheet. If ownership changed or there are multiple businesses, flag that before relying on a documentation shortcut.
I would then compare the proposed payment with the cash the business and household can sustainably support. A favorable documentation route can be useful without being a reason to borrow to the maximum it permits.
Sources and further reading
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Published September 13, 2026. Adapted from an origination discussion. Identifying details are omitted. Unconfirmed outcomes are not presented as completed loans. Program and lender requirements need an individual review. Nick Cunningham, Loan Officer, NMLS #907393. Mortgage services through Golden Bay Mortgage Group.
