topic Eligible Income for Credit Card Application in Credit Card Applications

Eligible Income for Credit Card Application

speednangels — Sun, 09 Apr 2023 16:45:59 GMT

I had a question as to what to report as my income when applying for credit cards. Currently, I only report my pre tax salary post 401k deductions. However, I also set aside 10% to my 401k with my employer matching dollar for dollar up to 10% and a year end additional 2% (coming out to 22% total) and my employer pays for my grad school tuition. Would I report these as non-taxable incomes? It ends up coming out to roughly an additional 100k, granted I don't have access to funds in 401k and the tuition money is sent directly to university so I don't see it besides the pay stubs indicating it was approved and paid.

Re: Eligible Income for Credit Card Application

fury1995 — Sun, 09 Apr 2023 17:23:44 GMT

@speednangels wrote:
I had a question as to what to report as my income when applying for credit cards. Currently, I only report my pre tax salary post 401k deductions. However, I also set aside 10% to my 401k with my employer matching dollar for dollar up to 10% and a year end additional 2% (coming out to 22% total) and my employer pays for my grad school tuition. Would I report these as non-taxable incomes? It ends up coming out to roughly an additional 100k, granted I don't have access to funds in 401k and the tuition money is sent directly to university so I don't see it besides the pay stubs indicating it was approved and paid.

I'm not a tax expert but I do know that documentable income from all sources taxed or untaxed, qualifies as income. You should be prepared to be able to prove it if asked.

Your employment income would be total gross, before deductions. Funds you don't have access to such as money already in your 401K would be considered assets.

Curious that your paystub indicates your tuition is paid on your behalf. That makes the appearance of a tuition reimbursement limiting the untaxable amount to $5,250 per year.

Re: Eligible Income for Credit Card Application

speednangels — Sun, 09 Apr 2023 17:39:13 GMT

Thanks for the help. I will update accordingly. Perhaps I should have clarified. The tuition stub is different from my paystubs. It is purely for tuition and doesn't reflect any of my income from work. They had me fill out a questionnaire asking stuff like "Does it improve skills for current role?" and "Will it qualify you for new line of work?" They three potential outcomes were fully taxed, taxed above $5,250 (like you mentioned), and untaxable. Was found to be untaxable, thankfully. All the tax code stuff way above my paygrade.

Re: Eligible Income for Credit Card Application

SouthJamaica — Sun, 09 Apr 2023 21:48:54 GMT

@speednangels wrote:
I had a question as to what to report as my income when applying for credit cards. Currently, I only report my pre tax salary post 401k deductions. However, I also set aside 10% to my 401k with my employer matching dollar for dollar up to 10% and a year end additional 2% (coming out to 22% total) and my employer pays for my grad school tuition. Would I report these as non-taxable incomes? It ends up coming out to roughly an additional 100k, granted I don't have access to funds in 401k and the tuition money is sent directly to university so I don't see it besides the pay stubs indicating it was approved and paid.

Yes that is all income.

Re: Eligible Income for Credit Card Application

Aim_High — Tue, 11 Apr 2023 17:43:06 GMT

I think you're confusing "compensation" with "income" and that a lender may or may not interpret these the same way, @speednangels. The tax ramifications are more of a distraction from clarifying the definition. They play only a minor part, since sometimes there is a block with lender websites to declare "untaxed income" as a portion of what is on your W-2.

As @fury1995 said, you need to be able to prove it if asked, and that your income is total GROSS income, before deductions. So you've been shorting yourself by declaring only your NET income after the 401K contribution. And why can you declare that? Because it's income that you have access to, and you could elect to stop the 401K contributions to take the cash instead. For the same reason, if you are married, you may normally declare all household income for which you have access, so W-2 (1) + W-2 (2) + investment incomes or income from a documentable side business.

Income is money, direct wages, salary, and bonuses but not perks or other types of compensation. If the tuition payment is not taxable, is not flowing through your hands, and is going directly to the university to defray your tuitions cost, then it is compensation ... but it is not income. You aren't paid that money nor have direct access to the funds themselves. If you dropped out of the university tomorrow (or graduated), the benefit would cease even though your employment would continue, so it's perishable. Therefore, it's a perk of which you're temporarily taking advantage. One tell-tale sign is that it's excluded from and reported separately from your income on your W-2.

Lenders want to know what cash resources you have to pay your credit card bill. And they don't know or care if you're enrolled in college courses. It's beside the point. What about if an employer provides a company car and pays the monthly lease payment? Can you declare the full value of that? (This is a complicated example since personal use of that car would be taxable but business use would not be taxable.) What about the portion of medical or dental insurance premiums that the company is paying on your behalf? What if your employer provides a fitness center or snacks at work? There are many other completely Non-Taxable Fringe Benefits that don't show up on a W-2 as income even though they add value. (>This website< lists some examples.)

I have a sizable 401K employer contribution that is not a match; it is paid regardless of my contribution. That 401K contribution does not show on my W-2 ... and I don't consider it as income. I don't directly receive the contributions as payment to my banking account. While I (could) access those funds albeit with a penalty withdrawal from my 401K, it's only an asset until I withdraw the funds. The employer's 401K contribution should not be included IMO; however, as I said above, YOUR 401K contribution should be considered as income.

I would say that to be safe, and in case you were asked for documentation, only declare GROSS income from all household W-2s, other income that you can show is flowing into your checking account, or investment income documenatable by forms like 1099-INT or 1099-DIV.

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@fury1995 wrote:
... You should be prepared to be able to prove it if asked ... Your employment income would be total gross, before deductions. Funds you don't have access to (such as money already in your 401K) ... would be considered assets.

@speednangelswrote: The tuition stub is different from my paystubs.
It is purely for tuition and doesn't reflect any of my income from work.