To fill out the MGIC SAM worksheet, download the Excel file from MGIC, enter two years of the borrower’s tax return figures into the sections that match their business entity, add back non-cash deductions like depreciation, subtract nonrecurring income, and let the worksheet average the two years and divide by 12 to produce a monthly qualifying income. The worksheet auto-calculates as you go, so the work is really about pulling the right numbers from the right tax forms and placing them on the right lines.
Download the Right Version
MGIC posts the Schedule Analysis Method worksheet at mgic.com/underwriting/seb and asks for your name, email, company, and job title before the download.1MGIC. Self-Employed Borrower Cash Flow Worksheets Two versions are available: a macro-enabled file with built-in automation and a macro-free file for environments where IT settings block macros. Both auto-calculate totals and show hover-over instructions on each line (the red triangles in the corner of each cell) explaining what value belongs there. The macro-free version also auto-populates year-over-year percentage changes on its Summary tab, which saves the manual trend math.
Tax Returns to Gather First
You need signed federal tax returns for the two most recent years, with every schedule attached. The specific forms depend on how the business is organized:
- Sole proprietorship: Form 1040 with Schedule C, plus Schedule SE if applicable.
- Partnership: the borrower’s Form 1040, the partnership’s Form 1065, and the borrower’s Schedule K-1.
- S corporation: the borrower’s Form 1040 and W-2 from the business, plus Form 1120-S and the borrower’s Schedule K-1.
- C corporation: the borrower’s Form 1040 and W-2, plus Form 1120.
- Farm: Form 1040 with Schedule F.
Lenders separately pull IRS transcripts through the Income Verification Express Service using Form 4506-C to confirm the returns match what the IRS has on file.2Internal Revenue Service. Income Verification Express Service (IVES) If the business has existed for at least five years and the borrower has held 25% or more ownership for five consecutive years, Fannie Mae allows a single year of returns instead of two.3Fannie Mae. Underwriting Factors and Documentation for a Self-Employed Borrower The worksheet has columns for two years but works fine with one filled in.
One more thing worth preparing before you start: a year-to-date profit and loss statement. Underwriters frequently request one to confirm the business hasn’t slid since the last tax filing. A signed unaudited P&L from the borrower is acceptable when it comes with recent business bank statements.
The Logic Behind Every Line
Self-employed borrowers routinely show lower taxable income than the cash they actually keep, because legal deductions reduce the taxable number without reducing the money in the bank. The SAM worksheet reverses the non-cash deductions to reconstruct real cash flow. Depreciation, depletion, and amortization get added back because none of them involves writing a check to anyone.4MGIC. Evaluating the Self-Employed Borrower and Other Sources of Income
The worksheet also strips out income that won’t repeat. A one-time equipment sale inflates the tax return but says nothing about ongoing earning power, so capital gains from Form 4797 or Schedule D get subtracted when they’re nonrecurring. A one-time casualty loss gets added back for the same reason in reverse: the borrower won’t keep paying for it. Non-deductible business meals get subtracted because that portion is still a real cash outlay even though the IRS didn’t let the borrower deduct it. Business use of the home gets added back on Schedule C since the borrower already pays for the house.
Completing the Section That Matches the Borrower
The worksheet is divided by entity type. You only fill in the section that applies, and each section cites the exact tax-form line numbers so you can pull values straight across.
Schedule C (Sole Proprietorship)
Begin at Schedule C, Line 31 (net profit or loss) and enter that figure. Then work through the add-backs: Line 12 for depletion, Line 13 for depreciation, Line 24b for the non-deductible portion of meals, and Line 30 for business use of the home. If amortization or casualty losses show up in Part V (Other Expenses), add those too.5MGIC. SAM Worksheet Help Document
Business mileage is the detail that trips people up. When a borrower uses the standard mileage rate instead of actual vehicle expenses, the IRS builds a depreciation component into that rate. The worksheet pulls business miles from Schedule C, Part IV, Line 44a and multiplies them by the depreciation factor for the tax year: $0.35 per mile for 2026 returns,6Internal Revenue Service. 2026 Standard Mileage Rates $0.33 for 2025 returns, and $0.30 for 2024 returns.4MGIC. Evaluating the Self-Employed Borrower and Other Sources of Income This only applies when the borrower used the standard mileage method. If they depreciated the vehicle directly on Line 13, you’ve already captured it, and adding the mileage figure would double-count.
Form 1065 and Schedule K-1 (Partnership)
Partnership income flows through the K-1, so start there. Enter Line 1 (ordinary business income or loss), Lines 2 and 3 (net rental real estate income, if verified as recurring), and Line 4c (total guaranteed payments).7Enact Mortgage Insurance. MGIC SAM Worksheet That subtotal is multiplied by the borrower’s ownership percentage shown on the K-1.
Then move to the Form 1065 itself for entity-level add-backs: Line 16c for depreciation, Line 17 for depletion, Line 20 for other deductions (where amortization usually appears), and Schedule M-1, Line 4b for the non-deductible portion of travel and entertainment.5MGIC. SAM Worksheet Help Document These entity-level numbers are also multiplied by the borrower’s ownership percentage before being added to the running total.
Form 1120-S and Schedule K-1 (S Corporation)
S corporation owners get income from two places: the W-2 the corporation pays them, and their share of profits on the K-1. The worksheet captures both. Enter the W-2 wages from Box 5, then the K-1 amounts: Line 1 for ordinary business income or loss and Lines 2 and 3 for rental income when it’s recurring.5MGIC. SAM Worksheet Help Document
On the Form 1120-S side, the entity-level entries mirror the partnership section: Line 14 for depreciation, Line 15 for depletion, Line 19 for other deductions, and Schedule M-1, Line 3b for non-deductible travel and entertainment. If the business shows a loss after these adjustments, that loss reduces the borrower’s qualifying income. The worksheet does not ignore it.
Form 1120 (C Corporation)
C corporations are less common on self-employed files because the corporation’s income doesn’t flow through to the borrower’s personal return. Start with Form 1120, Line 30 (taxable income) and Line 31 (total tax), then add back depreciation from Line 20, depletion from Line 21, and amortization identified in Line 26. Subtract nonrecurring capital gains from Lines 8 and 9, and remove net operating loss deductions from Lines 29a and 29b since those don’t represent current-year cash flow.5MGIC. SAM Worksheet Help Document
Other Schedules
Borrowers with additional income sources fill in the matching sections: Schedule B for interest and dividend income from the business, Schedule D for recurring capital gains, Schedule E for royalties and rental income, and Schedule F for farming. Each follows the same pattern. Start with the net figure, add back non-cash deductions, strip out anything nonrecurring.
Averaging and the Trend Check
Once every applicable section is filled in, the worksheet totals the adjusted cash flow for each year separately, averages the two years, and divides by 12 to produce a monthly qualifying income figure. The Summary tab generates the year-over-year percentage change.4MGIC. Evaluating the Self-Employed Borrower and Other Sources of Income
The trend matters because underwriters are looking at direction, not just the dollar figure. Fannie Mae requires lenders to measure year-to-year trends in gross income, expenses, and taxable income and decide whether the trajectory supports the borrower’s ability to keep earning at that level.3Fannie Mae. Underwriting Factors and Documentation for a Self-Employed Borrower A strong upward trend can sometimes justify using a higher figure; a flat trend lets the average stand on its own.
When Income Is Declining
Declining income is where files get complicated. When year-over-year income drops, Fannie Mae’s Income Calculator averages the declining income over 12 months, effectively using only the lower, most recent year, and flags the file with a message requiring the lender to document that income has stabilized before it can be used for qualification.8Fannie Mae. Income Calculator Frequently Asked Questions In practice the underwriter will ask for a year-to-date profit and loss statement showing the slide has stopped.
If the decline is steep, the underwriter may exclude self-employment income entirely and qualify the borrower on other documented sources, like W-2 wages from a separate job. Head off that outcome by providing the P&L and recent bank statements before the underwriter asks. A signed letter explaining the reason, whether a lost client, a market correction, or an unusual year, helps too, though it won’t substitute for actual numbers showing recovery.
Moving the Figure to the Loan Application
The monthly income figure from the SAM worksheet is entered on the Uniform Residential Loan Application (Fannie Mae Form 1003 / Freddie Mac Form 65).9Fannie Mae. Uniform Residential Loan Application That number drives the borrower’s debt-to-income ratio. The completed worksheet itself goes in the loan file, where the underwriter cross-references every line against the IRS transcripts pulled through IVES.
Discrepancies between the worksheet and the transcripts are the most common reason files stall. Transposed numbers, missing schedules, and add-backs applied to the wrong line all trigger requests for corrections. Before submitting, compare each worksheet entry against the corresponding line on the tax return. Five minutes of checking saves days of back-and-forth.