Decrypting Personal Tax Returns Part 2: Form 1040, Schedules D, E & F

Instead of stopping at “taxable income,” learn how to translate the numbers reported in Form 1040, Schedule D, Schedule E (Pages 1 and 2), and Schedule F into usable monthly and annual cash flow and support faster, more confident loan decisions.

What does a lender need from a personal tax return? Cash flow. Cash flow pays back the loan. However, tax returns do not show cash flow directly.  They show taxable incomes. Therefore, a lender needs the “secret code” to decrypt a tax return and obtain a reliable monthly or annual cash flow.

In Part 2 of this two-part series, we will cover Schedule D (Capital Gains and Losses), Schedule E, Page 1 (Income or Loss From Rental Real Estate and Royalties), Schedule E, Page 2 (Income or Loss From Partnerships and S Corporations), and Schedule F (Profit or Loss From Farming). When you finish this session, you will be able to use the free Lenders Tax Analyzer© software to convert taxable incomes into cash flows that plug directly into your credit scoring models, debt-to-income ratios, and disposable income calculations.

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