Increase of Taxable Income

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Table of contents

Current Guideline

Currently, CMHC has not defined any guideline or formula on the increase in the taxable income.

Guiding line

In the case of a borrower whose income is not taxable, an approved lender can increase the income for purposes of calculating the GDS and TDS ratios using the method in two parts as follows:

Liability of lender approved

Required documentation (the lender must add to file)

  • Confirm that the income is not taxable, such as obtaining the following documents:
    • statement or pay stub;
    • notice of assessment from the Canada Customs and Revenue Canada;
    • Letter from the organization paying the non-taxable income;
  • T5007 (compensation for accidents at work and social assistance).

Process

Example 1

The following example shows the steps that should follow approved lender to calculate the total income taken by a borrower based on non-taxable income only.

Non-taxable income of the borrower X Factor increase = Income increased

Non-taxable income of the borrower = $25,000
Factor increase = 25%

Income increased = $25,000 $ X 1.25% = $31,250

Example 2

The following example shows the steps that should follow approved lender to calculate the total income taken by a borrower based on non-taxable income and taxable income.

(Non-taxable income of the borrower X Factor increase = Income increased) + Taxable income of the borrower = Total gross income of the borrower

Non-taxable income of the borrower = $25,000
Factor increase = 25%
Taxable income = $50,000$

Total gross income = (($25,000 X l.25%) = $31,250) + $50,000 = $81,250

To determine eligibility, use the total gross income of the borrower as total income considered.

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