(a)

1. (1) All wages, salary, commissions, interest, pensions, and other sources of financial support, paid or in kind including Supplemental Security Income, Social Security Disability Insurance, and retirement benefits shall be considered as income.
2. (2) The adjusted gross income (AGI) includes nontaxable income made equivalent to taxable income by multiplying the taxable income by twenty-five hundredths (0.25).

(d) Rental property income.

1. (1) Rental property income will be calculated using the following formula: Gross monthly rent – monthly mortgage payment = net amount
2. (2) Note. The formula does not apply if the monthly mortgage payment is for the applicant’s primary residence.
3. (3) The net amount will be entered as debt or income.
4. (4) Neither the gross rent nor the mortgage payment will be used in the debt-to-income calculation.

(e) Self-employment income.

1. (1) The income of self-employed individuals will be determined from federal tax returns and schedules.
2. (2) Generally self-employment income can be calculated by taking the net income figure from the various schedules and adding back any noncash expenses, i.e., depreciation, but other issues such as the stability and sustainability of the income will be considered.

(f) Nontaxable income.

1. (1) The following types of income will be grossed up to adjust for the nontaxable status prior to calculating the debt-to-income ratio:

   1. (A) Social Security Disability Insurance;
   2. (B) Public assistance (excluding unemployment); and
   3. (C) Tax-free interest income.
2. (2) The following formula will be used to calculate the grossed-up amount of the types of income listed above: Income amount X 0.25 = grossed-up amount (rounded to nearest dollar)

(g) Investment income.

1. (1) Investment income will be determined by averaging the two most recent years’ income.

2. (2)

   1. (A) Interest and dividend income may be considered ongoing income.
   2. (B) However, capital gains will be treated as a one-time income opportunity.