Short answer: Most Canadian lenders use the net income on your T1 General (line 15000 total income, confirmed by your Notice of Assessment), averaged over the last two years. They don’t use gross revenue. Write offs lower that number, though some lenders add back non cash expenses like depreciation. Incorporated owners usually qualify on salary (T4) and dividends (T5), and some lenders also consider retained earnings. If write offs keep your income low, alternative lenders can use stated or adjusted income, usually with more down payment.
Why Self Employed Income Is Treated Differently
It can change year to year and is shaped by deductions, business structure and seasonal cash flow. Lenders look at revenue, expenses, net income, salary, dividends and retained earnings to see the full picture.
Sole Proprietors
Lenders focus on net business income from your T1 General, NOA and Statement of Business Activities, looking for consistency. The income you report to CRA, not your gross sales, drives your borrowing power.
Two Year Averaging
Most lenders average two years to smooth out highs and lows. If income is rising, some weigh the latest year more heavily.
Incorporated Owners
Lenders may use T4 salary, dividends, net income inside the company or retained earnings, depending on the program. You have flexibility in how you pay yourself, but lenders need more documents to verify it.
→ Related: Salary vs Dividends for Incorporated Owners
Do Write Offs Hurt Qualification?
Yes. They reduce taxable income, which is what most lenders use. Some programs allow add backs or alternative verification. Know how your write offs change the number before you file, if a purchase is coming.
What Makes a File Stronger
- Stable or rising income over two years
- Clean, complete tax filings
- Reasonable debt
- Business and personal finances kept separate
How We Help
We calculate your qualifying income the way lenders will, before you shop, and match you to lenders whose rules fit your structure. Self employed mortgages · Book a call.
Frequently asked questions
Do lenders use gross revenue for self employed borrowers?
No. They use net income after business expenses, as reported to CRA on your T1 General.
Can one strong year be enough?
Most lenders average two years, so a weaker prior year pulls the average down. Some programs weigh the most recent year more if income is rising.
Can incorporated owners use salary and dividends together?
Yes, when documented with T4 and T5 slips and the T1 General. Some lenders also consider retained earnings in the company.
Do all lenders calculate it the same way?
No. Guidelines vary, which is why matching your income structure to the right lender matters as much as your documents.
This article is general information, not personal financial advice. Rates, rules and programs change. Talk to a licensed mortgage broker about your situation. Lacroix Mortgage Group is licensed through Mortgage Connection Inc.