Calculating Income, 401K Loans & Child Support 

Calculating Income, 401K Loans & Child Support

When to Use YTD Income

Use the YTD calculation method when a member's income includes:

• Overtime
• Bonuses
• Commissions
• Other variable earnings that are received consistently

When NOT to Use YTD Income

Do not use YTD income when:

• The member has not been in the position for the full year.
• The member is salary-based and does not receive consistent bonus or additional earnings.
• The member's income can be accurately calculated using their stated salary or hourly rate.

YTD Income Calculation Steps

Step 1: Determine Complete Months

• Count the number of full months completed in the calendar year.
• Example:
  • Pay Period End Date – 10/22/2026
  • Months Complete - 9

Step 2: Calculate the Partial Month

• Locate the Pay Period End Date on the paystub.
• Divide the day of the month by the total number of days in that month.
• Example:
  • Pay Period End Date: 10/22/2024
  • 22 ÷ 31 = .71

Step 3: Find Gross YTD Income

• Locate the Gross Year-to-Date (YTD) Income on the paystub
• Example:
  • YTD Gross Income $32,985.32

Step 4: Calculate Average Monthly Income

• Add the full months and partial month together, then divide the Gross YTD Income by that figure.
• Example:
  • Full Months Completed: 9
  • Partial Month: .71
  • Gross YTD Income: $32,985.32
  • $32,985.32 ÷ 9.71 = $3,397.05

Gross Monthly Income = $3,397.05

Salary Calculation

Always verify Frequency to determine how many Pay Periods they have per year.

Example:

• Salary - $2,500 Bi-Weekly
• $2,500 x 26 = $65,000 Annual Income
• $65,000 ÷ 12 = $5,416.67 Monthly Income

Key Reminders

• Always use Gross Income (Not Net Income)
• Use the Pay Period End Date, not the Check Date or Pay Date
• Confirm bonus, commissions and overtime income is consistent before including it in qualifying income

Self Employment (1099) Income

Use this Calculation for members who are self-employed and provide two years of tax returns

Schedule C Income Calculation Steps

Step 1: Locate Schedule C

Review the Schedule C on each of the two most recent tax returns.

Step 2: Find Lines 13 and 31

For each year, locate:

• Line 31 – Net Profit (Loss)
• Line 13 – Depreciation Expense

Step 3: Calculate Total Income

• Add Lines 13 and 31 together for each year.

Step 4: Determine Gross Monthly Income

• Add the totals from both years and divide by 24 months.

Formula:

Year 1 (Line 13 + Line 31) + Year 2 (Line 13 + Line 31) = Gross Annual Income

Gross Annual Income ÷ 12 months = Gross Monthly Income

Example:

• Year 1
  • Line 31 = $85,000
  • Line 13 = $1,500
  • Total - $86,500

• Year 2
  • Line 31 - $65,000
  • Line 13 - $1,200
  • Total - $ 66,200

Calculate Gross Monthly Income

$86,500 + $66,200 = $152,700

$152,700 ÷ 24 = $6,362.50

Gross Monthly Income = $6,362.50

Key Reminders

• Add back Depreciation (Line 13) to Net Profit (Line 31) for each year
• Use 2 Years of Tax Returns
• Divide the combined total by 24 months to determine Gross Monthly Income

401K Loans & Child Support

Use this calculation when you are verifying Proof of Income and you see a deduction for a 401K Loan or Child Support

401K Loan & Child Support Calculation

Step 1: Verify Pay Frequency

Determine the member's pay frequency and the number of pay periods per year.

Step 2: Verify Deduction Amount

Locate the amount deducted for each pay period for:

• 401(k) Loan
• Child Support

Step 3: Calculate Monthly Payment

Multiply the deduction amount by the number of pay periods per year, then divide by 12 months.

Example

• Pay Frequency: Bi-Weekly
• 401(k) Loan Deduction: $83 per pay period

Calculate Monthly Payment

$83 × 26 = $2,158 annually

$2,158 ÷ 12 = $179.83

Monthly Payment = $179.83