Depreciation add-back
Depreciation is a non-cash expense — it reduces Schedule C net income without representing real money leaving the business. Conventional lenders add it back to qualifying income. It’s one of the most valuable add-backs for self-employed borrowers who own business equipment or real property.
How does this affect your loan? Estimate self-employed qualifying income with the
DTI calculator, or read the
self-employed mortgage guide.
Related terms
- Rising income / declining income — Income trend affects how lenders apply the two-year average. Rising income (year 2 higher than year 1) is favo…
- Add-back — A non-cash or one-time business expense that can be added back to Schedule C net income when calculating quali…
- 1099-NEC / 1099-K — IRS forms reporting non-employee compensation. 1099-NEC covers freelance and contractor income paid by clients…
- W-2 income — Employer-reported wages documented on a W-2 form. Treated by lenders as the most verifiable income type — full…
- DTI (Debt-to-Income Ratio) — The percentage of your gross monthly income that goes toward debt payments. Front-end DTI covers housing costs…
← Back to the full mortgage glossary
Sources
Educational definition only — not financial, legal, or tax advice. Programs and limits change; verify current terms with a licensed professional.