Grossing Up Fixed Income Tax-free income may be “grossed up” for purposes of calculating the debt-to-income ratio only (not residual income). This is a tool that may be used to lower the debt ratio for veterans who clearly qualify for the loan. “Grossing up” involves adjusting the income upward to a pre-tax or gross income amount which, after deducting state and Federal income taxes, equals the tax-exempt income. Use current income tax withholding tables to determine an amount which can be prudently employed to adjust the borrower’s actual income. Do not add non-taxable income to taxable income before “grossing up.” Tax-free income includes certain military allowances, child support payments, workers’ compensation benefits, disability retirement payments and certain types of public assistance payments. Verify that the income is indeed tax-free before “grossing up.”
Posted on: Fri, 03 Oct 2014 22:51:11 +0000
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