Investment Income
Interest, dividends, capital gains, and K-1 distributions — averaged, tested for continuance, and separated from retained earnings.
Investment income can qualify a borrower — or disqualify a scenario — depending on how it's read. Interest and dividends on Schedule B need a two-year average and a continuance check against the underlying assets. Capital gains are highly variable and only count when a consistent history and remaining assets support the future run rate. K-1 distributions must be separated from retained earnings that the borrower can't actually access.
IncomeCalculator.com reads Schedule B, the capital gains schedules, and K-1s together with the supporting asset statements, applies the required averaging and continuance tests, and returns a defensible monthly investment income figure — with the assets that support it clearly identified.
What to upload
- Personal tax returns (Form 1040) with Schedule B, Schedule D, and Form 8949
- K-1s for each entity the borrower has ownership in
- Recent brokerage and bank statements supporting the reported income
- 1099-INT, 1099-DIV, and 1099-B forms
- Documentation of any capital gain events and remaining asset base
How the calculation works
Separate income streams
Interest, dividends, capital gains, and K-1 distributions are each identified from the tax return and the underlying 1099s, then evaluated on their own rules.
Average and test continuance
Interest and dividends are averaged over two years and tested against remaining assets. Capital gains require a consistent multi-year history and enough remaining asset base to project forward.
Handle K-1 distributions vs. retained earnings
For pass-through entities, only distributed income the borrower can access is counted. Retained earnings that stay inside the entity are excluded from qualifying income.
Supported programs
Conventional, FHA, VA, and Non-QM. Continuance rules and averaging windows vary by program and are applied automatically.
Common questions
How are capital gains treated?
Capital gains only count with a consistent two-year (or longer) history and a remaining asset base that supports the future run rate. Sporadic gains from a one-time sale are typically excluded.
Do interest and dividends need a continuance check?
Yes. Both are averaged over two years and tested against the underlying assets to confirm the income is likely to continue for the required period.
How are K-1 distributions handled?
Only distributed income the borrower actually receives counts as investment income. Retained earnings inside a partnership or S-corp are not counted unless the borrower has full access and the entity's cash flow supports it.