To calculate your gross monthly income, add up everything you earn in a month before taxes, retirement contributions, insurance premiums, or any other deductions come out. The exact formula depends on how you’re paid, but the principle holds across every version: start with the full amount your employer agrees to pay you, and subtract nothing.
Formulas by Pay Schedule
Pick the one that matches how your paycheck arrives.
Annual salary. Divide your yearly compensation by 12. A $78,000 salary works out to $6,500 per month.
Hourly wages. Multiply your hourly rate by hours worked per week, multiply by 52 weeks, then divide by 12. Someone earning $25 an hour for 40 hours a week has a gross monthly income of $4,333.
Biweekly pay (every two weeks). Multiply the gross amount on one paycheck by 26 pay periods, then divide by 12. A biweekly gross check of $2,400 produces $5,200 per month. Don’t shortcut this by doubling a single check: two months each year contain three biweekly paydays, and simple doubling undercounts you.
Semi-monthly pay (twice a month on set dates). Multiply one gross check by 2. Two checks of $2,600 each give you $5,200 a month.
In each case, work from the gross figure at the top of your pay stub, not the deposit amount. The gross includes federal and state income tax withholding, Social Security and Medicare tax, and any voluntary deductions like 401(k) contributions or health premiums. All of that stays in.
What “Gross” Actually Means
Most people never see the gross number land in their account, so they default to thinking of their take-home pay as their income. That’s a mistake when a lender or landlord asks for gross monthly income.
Traditional 401(k) deferrals are excluded from current taxable income, but they still count as wages for Social Security and Medicare purposes, and they count toward gross monthly income too.1Internal Revenue Service. 401(k) Plan Overview Here’s what that looks like in practice: if your salary is $72,000 and you contribute $24,500 to a 401(k) in 2026, your gross monthly income is still $6,000.2Internal Revenue Service. 401(k) Limit Increases to $24,500 for 2026, IRA Limit Increases to $7,500 Report the lower direct-deposit figure instead and you’ll qualify for less than you should.
On a pay stub, look for the line labeled “gross pay” or “gross earnings.” If you can’t tell which number is which, your payroll department can confirm.
Bonuses, Overtime, and Commissions
Variable pay doesn’t go in at face value. Lenders want proof that it’s reliable before counting it. Fannie Mae’s guidelines call for at least a two-year history of this type of income, though 12 months can sometimes qualify when other factors support it.3Fannie Mae. Bonus, Commission, Overtime, and Tip Income
To fold variable pay into your calculation, add two years of bonuses or overtime together and divide by 24. If you earned $12,000 in bonuses last year and $8,000 the year before, your monthly bonus average is $833. Add that to the base-salary figure you calculated above.
One caveat: if the trend is heading down, averaging won’t save you. A lender will ask whether the current level has stabilized, and if it hasn’t, that income may not count at all.3Fannie Mae. Bonus, Commission, Overtime, and Tip Income
If You’re Self-Employed
Without pay stubs, the calculation runs off your tax returns. The key figure is line 31 of IRS Schedule C (Form 1040), which shows net profit: business revenue minus deductible expenses.4Internal Revenue Service. Schedule C (Form 1040), Profit or Loss from Business Divide annual net profit by 12 for your monthly number. When income swings year to year, lenders typically average the two most recent returns to smooth things out.5Fannie Mae. Underwriting Factors and Documentation for a Self-Employed Borrower
Add Back Depreciation and Similar Non-Cash Deductions
Self-employed borrowers often undercount themselves because Schedule C deductions reduce taxable income without reflecting cash that actually left the business. Fannie Mae’s guidelines allow depreciation, depletion, business use of home expenses, and amortization to be added back for qualification.6Fannie Mae. Income or Loss Reported on IRS Form 1040, Schedule C A Schedule C with $60,000 in net profit and $15,000 in depreciation becomes $75,000 for qualifying purposes, moving your gross monthly income from $5,000 to $6,250.
Declining Income Gets Scrutinized
Averaging two years isn’t automatic. If you made $90,000 two years ago and $60,000 last year, the raw average is $75,000, but an underwriter will want a written analysis of why the business dropped and whether it has leveled off. Fannie Mae requires this comparison of year-over-year gross income, expenses, and taxable income.5Fannie Mae. Underwriting Factors and Documentation for a Self-Employed Borrower If the slide hasn’t stopped, the lender may use only the lower year or set the income aside entirely.
Other Income You Can Add In
A paycheck isn’t the only piece of your gross monthly income. Several other recurring sources count, each with its own rule.
Rental Income
Lenders don’t credit the full rent your tenants pay. Fannie Mae applies a 75% factor to gross monthly rent to account for vacancies and upkeep.7Fannie Mae. Rental Income A property pulling in $2,000 a month adds $1,500 to your gross monthly income. You’ll need lease agreements or a market rent appraisal to document it.
Alimony, Child Support, and Government Benefits
Alimony, child support, and government assistance count only if the payments are expected to continue at least three years from the date of your mortgage application.8HUD. HUD Handbook 4155.1 Chapter 4, Section E – Non-Employment Related Borrower Income A court order with only two years remaining won’t qualify. You’re not required to disclose alimony or child support if you’d rather not, but then it can’t help your calculation either.
Social Security, Pensions, and Annuities
Social Security counts when verified by a benefit letter from the SSA, available through your my Social Security account.9Social Security Administration. How Can I Get a Benefit Verification Letter? Pension and annuity payments count if you can show they’ll continue. Some lenders will “gross up” non-taxable income like certain Social Security benefits by 15% to 25% to put it on equal footing with taxable wages. Ask whether yours allows the adjustment.
Documents to Pull Before You Calculate
Working from actual paperwork beats working from memory. What you need depends on how you earn:
- Salaried or hourly: pay stubs covering at least 30 days, plus W-2s from the past two years.10PNC. Proof of Income: What to Know When Applying for a Mortgage
- Self-employed: two years of personal federal tax returns including Schedule C, and any applicable business returns. Lenders may pull IRS transcripts to verify.11Internal Revenue Service. Self-Employed Individuals Tax Center
- Independent contractors: 1099-NEC forms along with tax returns.12Internal Revenue Service. Instructions for Forms 1099-MISC and 1099-NEC
- Other income: Social Security benefit letters, pension statements, lease agreements, divorce decrees or support orders.
Why the Number Matters
Your gross monthly income is the denominator in the debt-to-income ratio lenders use to decide approval and loan size. A $6,000 gross monthly income with $2,100 in monthly debts produces a 35% DTI. Fannie Mae caps the back-end ratio at 36% for manually underwritten conventional loans, with room up to 45% for borrowers with strong credit and reserves and up to 50% through automated underwriting.13Fannie Mae. Debt-to-Income Ratios FHA loans typically allow up to 43%, higher with compensating factors.8HUD. HUD Handbook 4155.1 Chapter 4, Section E – Non-Employment Related Borrower Income Every dollar of documented gross monthly income you can legitimately add lowers your DTI and raises your borrowing capacity. Missing a bonus average or skipping a Schedule C add-back can mean the difference between approval and denial.
Don’t Round Up
Padding the figure to help an application is federal mortgage fraud. Under 18 U.S.C. ยง 1014, knowingly making a false statement on an application to a federally insured lender carries up to $1,000,000 in fines, up to 30 years in prison, or both, and the statute covers banks, credit unions, mortgage lenders, and the FHA.14Office of the Law Revision Counsel. 18 U.S. Code 1014 – Loan and Credit Applications Generally Honest math mistakes cause their own problems: when documentation doesn’t match the stated figure, the best outcome is delay. Use the formulas above, work from your actual documents, and check the arithmetic before you submit.