Change Date

September 15, 2004, Change 4

This section has been changed to create subsection lettering.

a. Income Tax and Social Security Deductions

Determine the appropriate deductions for Federal income tax and Social Security using the “Employer’s Tax Guide,” Circular E, issued by the Internal Revenue Service.

Determine the appropriate deductions for state and local taxes using similar materials provided by the states.

The lender may consider the applicant’s potential tax benefits from obtaining the loan (for example, mortgage interest deduction) in the analysis.  To do so,

·   determine what the applicant’s withholding allowances will be, using the instructions and worksheet portion of IRS Form W-4, Employee’s Withholding Allowance Certificate, and

·   apply that withholding number when calculating Federal and state income tax deductions.