Freelancer Income Inputs
Result will appear above this form after calculation, under the header section.
How to Use This Calculator
- Enter your recent monthly gross income averages for 12, 6, and 3 months.
- Add your typical business expenses and any defensible add-backs.
- Set an effective tax rate and any other monthly deductions.
- Provide stability inputs like months freelancing and client concentration.
- Choose a method, then compare scenarios using different assumptions.
- Use CSV or PDF exports to save and share outcomes.
Formula Used
1) Base gross income is selected by your method:
- Standard: Base = Gross12
- Conservative: Base = min(Gross12, Gross6)
- Weighted: Base = 0.50·Gross12 + 0.30·Gross6 + 0.20·Gross3
2) Stability factor reduces Base using tenure, diversification, concentration, and volatility haircuts.
3) Qualifying gross (monthly):
QualifyingGross = (Base × StabilityFactor) + OtherStableIncome
4) Adjusted gross (monthly):
AdjustedGross = max(0, QualifyingGross − BusinessExpenses + AddBacks)
5) Net qualifying income (monthly):
Net = max(0, AdjustedGross − (AdjustedGross × TaxRate) − OtherDeductions)
6) Debt-to-income ratio (using net for conservative planning):
DTI% = 100 × (ExistingDebts + ProposedPayment) / max(Net, 1)
Income Averages and Trend Weighting
Use three monthly averages to reflect earning patterns. Track monthly deposits, invoices, and contracts so averages match the documents you can provide. The weighted method applies 50% to the 12‑month average, 30% to the 6‑month average, and 20% to the 3‑month average. If income is falling, the conservative option uses the lower of 12 and 6 months.
Stability Factor and Documentation Strength
Stability reduces base income to account for risk. Tenure multipliers are 0.70 for under 6 months, 0.85 for 6–11, 0.95 for 12–23, and 1.00 for 24+ months. Client diversification applies 0.90 for one client and 0.95 for two. Concentration reduces income to 0.96 when the top client exceeds 40%, and 0.92 when it exceeds 60%. Volatility adds a haircut up to 20%, and the factor is clamped between 0.50 and 1.00.
Expense, Add‑Back, and Tax Normalization
Qualifying gross is adjusted by subtracting business expenses and adding defensible add‑backs. Add‑backs should be non‑recurring or non‑cash items. Estimated tax equals adjusted gross multiplied by the effective tax rate you enter. Other deductions capture predictable outflows such as insurance or mandatory contributions, lowering net qualifying income.
Eligibility Rules and DTI Guardrails
Eligibility checks compare net qualifying income against a minimum target and evaluate debt‑to‑income. DTI is computed as (existing debts + proposed payment) ÷ net income, expressed as a percentage. Many programs prefer maximum DTI between 36% and 45%, but you can set any limit from 10% to 70% for planning. Negative remaining cash flow after payments triggers a fail because reserves may be required.
Scenario Planning and Exportable Evidence
Run scenarios by changing volatility, concentration, and expenses to see sensitivity. A small change in volatility can reduce the stability factor and qualifying income. Export to CSV for comparisons and to PDF for sharing. Save results with consistent assumptions, then refine inputs as new invoices arrive.
Example Data Table
| Profile | 12-mo Avg Gross | Expenses | Tax Rate | Months | Top Client Share | Volatility | Outcome |
|---|---|---|---|---|---|---|---|
| Designer (diversified) | $5,200 | $900 | 18% | 24 | 28% | 15% | Often eligible with moderate DTI. |
| Developer (single client) | $6,800 | $1,100 | 22% | 10 | 75% | 20% | Likely review due to concentration. |
| Content writer (volatile) | $3,600 | $500 | 15% | 18 | 42% | 45% | Haircut reduces qualifying income. |
Example rows are illustrative and not financial advice.
FAQs
1) Should I enter revenue or profit as gross income?
Use gross revenue averages, then subtract business expenses below. If you already track profit monthly, you can set expenses lower to avoid double-counting.
2) Why does volatility reduce my qualifying income?
Freelance earnings can swing month to month. A volatility haircut builds a buffer, so affordability looks safer during slow periods.
3) What counts as an add-back?
Typically one-time expenses or non-cash charges that won’t repeat. Always confirm what your lender or program accepts before relying on add-backs.
4) Why use net income for DTI here?
Using net income is conservative for freelancers because taxes and costs are real outflows. Some lenders compute DTI from gross; you can compare by lowering tax or expenses.
5) What if I have less than 12 months of history?
Some programs accept 6 to 11 months with strong documentation. This calculator flags “Needs Review” because underwriting often becomes manual.
6) How should I pick the qualifying method?
Use weighted if you’re growing steadily, standard for stable earnings, and conservative if income is declining or highly uncertain.