VA Nontaxable Income Documentation Checklist

Use this checklist before discussing nontaxable income with a loan officer. The lender must determine which portions are actually nontaxable, verify receipt and expected continuance, and apply the current VA guidance and any lender requirements. An adjusted DTI figure does not replace actual income in VA's residual-income analysis.

Documents to gather

• Current income statements such as an LES, benefit letter, retirement statement, or other official award record that identifies the income source.
• Recent evidence of receipt when the lender requests it, such as account records that can be matched to the documented source.
• Tax records or other documentation needed to separate taxable and nontaxable portions; do not assume an entire pension, SSDI benefit, or specialty-pay category is nontaxable.
• Orders, benefit terms, or other evidence relevant to expected continuance. Active-duty allowances or specialty pay may change after separation or a change of duty.

Questions for the loan officer

• Which dollar amounts did you verify as taxable and nontaxable?
• What evidence supports receipt and expected continuance for each source?
• Which current VA guidance and lender requirements govern any DTI adjustment on this file?
• What are the DTI ratios using actual income and the adjusted denominator?
• What residual-income result do you get using actual income and applicable deductions?

• Borrower explanation: DTI vs. residual income →
• Arithmetic illustration calculator →
• VA Credit Standards FAQ →