USDA Loan Income and Deduction Types

[Anonymous]

Hi all,

It looks like I have everything figured out for a USDA loan except for one item.

I am a W2 employee and I collect mileage reimbursements from my company.  We are a C-corp and the way I get my mileage reimbursements is through what is called an Accountable Plan.  This means that I submit mileage on my personal vehicle, the company takes the deduction for the business related travel and I get a check for my expenses that is not reported on either a W2 or 1099.

The accountable plan is outlined in the link below:

http://www.irs.gov/publications/p463/ch06.html

So my question is two fold:

1.  Are the reimbursements I get reportable and how can I prove the income?  Maybe cancelled checks from the previous 12 months?

2.  I was reading in AN 4367 regarding self-employment income on the USDA website that if auto expenses are paid by the business instead of personal income, the debt of the auto loan should not be considered in the DTI calculations.  Has anyone ever worked with this situation in the past?  Would my debt disappear for the sake and DTI and would my mileage income count for qualification?

Below is a link to the Administrative Notices for the USDA, scroll down to AN 4367 and look on page 4.

http://www.rurdev.usda.gov/regs/an_list.html

Thanks for taking the time to address a difficult question!!!

Best regards,

Adrian Parker

[ShanetheMortgageMan]

How long have you been receiving "Accountable Plan" income?  Unless an amount ($ or %) is guaranteed in writing usually income like that needs to have been received for 24 months in order for it to be counted, plus will need to be likely to continue.

Did you check out table 6-1 in the IRS link you provided?  It tells you all of the situations where the employer would need to report and the employee reports.

As far as verifying the the Accountable Plan income you've received - a paper trail works wonders.  Sounds like you have cancelled checks from your employers bank account, that would be a start, plus the fact that your employer would be verifying you make that income.  What would likely be needed is a verification of employment form completed by your employer and depending on how the information filled out would determine if the underwritrer/lender would use it as qualifying income.

If your self employed business pays for the auto loan, and the auto loan is reported as an expense on the tax returns, then it wouldn't be included in the DTI since that would be counting it twice - once as an expense in the DTI and then again as a reduction in the net income used to qualify.

[Anonymous]

Thanks for the quick response.

I suppose I should clarify.

I don't have any self-employment income.  Instead, one could say that my employer "pays" for my auto loan through my mileage reimbursements.

Thoughts now???

[ShanetheMortgageMan]

Since you aren't self-employed then AN 4367 won't apply to you.  Car will be included in the DTI since the payments are made by you.  If the income has been rec'd for long enough and is expected to continue it can be used to qualify.