Self-Employed and Buying a Home? What Tax Season Means for Your Mortgage
It’s small business tax season, and if you’re self-employed, you’re likely doing everything you can to reduce your taxable income.
That makes sense, lower income on paper means paying less in taxes.
But then comes the question many business owners start to wonder:
“When it’s time to get a mortgage… are they using my net income or my gross income?”
The answer is — it depends.
It’s Not Black and White
If you’re business-for-self (and not incorporated), lenders don’t always look at your income in a straightforward way.
Instead, there are typically a couple of strategies we can use to increase your income for mortgage qualification.
Option 1: Grossing Up Your Income
Depending on the lender and your expense structure, we may be able to “gross up” your income by 15–20%.
This means increasing your reported income to better reflect your true earning power, especially if you’ve written off a reasonable amount of business expenses.
Option 2: Adding Back Certain Expenses
Another approach is adding back specific expenses that reduce your taxable income but don’t necessarily impact your actual cash flow.
These can include things like:
- Capital Cost Allowance (CCA)
- Business use of home
- Motor vehicle expenses
By adding these back, we can often increase your qualifying income significantly.
Real-Life Example
I recently worked with a client who had a large Capital Cost Allowance due to equipment purchases.
On paper, their income looked much lower than it actually was.
By properly structuring the file and adding back eligible expenses, we were able to increase their income by $118,000 — which made a major difference in what they qualified for (almost $400K in pre-approval amounts!)
What This Means for You
If you’re self-employed, it’s easy to assume that writing off expenses will hurt your chances of getting approved for a mortgage.
But that’s not always the case.
With the right approach and the right lender, there can be flexibility in how your income is reviewed.
The Bottom Line
If you’re in the middle of tax season and thinking about buying a home, don’t make assumptions about what you’ll qualify for.
Every situation is different — and how your income is structured can make a big impact.
A quick conversation can help you understand your options and put a plan in place that works for both your taxes and your future home purchase.
One quick reminder though, your 2025 taxes will be used to help you qualify for mortgages all the way into 2028 so you want to make sure the numbers work now!