By Tyler Stiller, CPA | Licensed Mortgage Broker (FSRA #M20002930) | Updated October 28, 2026
Short answer: Lenders qualify self-employed borrowers from the T1 General and Notice of Assessment, usually two years of each. They start with net business income on line 13500, not your sales. Then many lenders add back non-cash write-offs like capital cost allowance and business-use-of-home, or gross the income up by 15%. The right approach can raise your qualifying income by thousands.
I've been a CPA since 2013, and I've been on both sides of this. As an accountant, my job was to legally lower the income you pay tax on. As a mortgage broker, my job is to show a lender the highest income you can honestly support. Those two goals pull in opposite directions, and the T1 General is where they meet.
Here's how I read a self-employed borrower's return before it goes to a lender.
Which documents will a lender ask for?
For a sole proprietor or partner, most lenders want:
T1 Generals for the last two years, including the T2125 Statement of Business or Professional Activities
Notices of Assessment (NOAs) for the same two years
Proof the business is real and operating, such as a business registration, GST/HST number or business bank statements
CMHC's self-employed guidelines ask for the NOA with the T1 General and the T2125, and recommend at least 24 months in business or in the same line of work. Newer businesses can still qualify with some lenders, but the file needs more support.
If you're incorporated, the read is different. Your personal T1 shows salary and dividends (T4 and T5 slips), and the lender also looks at the company's financial statements. This article focuses on sole proprietors and partners.
Which lines on my T1 does a lender actually read?
This is the table I keep in my head when I open a self-employed return:
| Where it is | What it shows | What a lender does with it |
|---|---|---|
| Line 13499 | Gross business income (your sales) | Context only. Lenders don't qualify you on sales. |
| Line 13500 | Net business income after expenses | The starting point for your qualifying income. Professional income is on 13700, commission on 13900, farming on 14100. |
| T2125 line 9936 | Capital cost allowance (CCA), the tax version of depreciation | Often added back, because it isn't cash leaving your account. |
| T2125 line 9945 | Business-use-of-home expenses | Often added back, because you'd pay those home costs anyway. |
| Line 12600 | Net rental income | Usually replaced by the lender's own rental calculation based on gross rents. |
| Line 15000 | Total income from all sources | The number many people assume the bank uses. It includes non-business income that's handled separately. |
| NOA "balance owing" | Tax you still owe CRA | Has to be dealt with before closing. More on this below. |
Line 15000 used to be called "line 150", and bankers still use that name. For a self-employed borrower, it's rarely the whole story.
What are add-backs, and how much can they help?
Add-backs are expenses on your T2125 that reduced your taxable income but didn't actually reduce the cash you have available to pay a mortgage. The common ones are:
Capital cost allowance (CCA) on vehicles, equipment and other assets
Business-use-of-home expenses
Motor vehicle expenses, with some lenders
CMHC allows self-employment income for sole proprietors and partners to be either grossed up by 15% or increased by adding back eligible deductions. The lender picks one method, not both. When I prepare a file, I run both and present the stronger one, as long as the lender accepts it.
Here's a simple example. A contractor in Strathroy shows $62,000 on line 13500. His T2125 includes $8,000 of CCA on his truck and equipment, and $3,000 of business-use-of-home.
Line 13500 only: $62,000
15% gross-up: $62,000 × 1.15 = $71,300
Add-back method: $62,000 + $8,000 + $3,000 = $73,000
That's an $11,000 difference in qualifying income from the same tax return. At today's stress-test rates, that can be the gap between approved and declined, or between the house you want and the one you settle for.
One detail matters here. The 15% gross-up applies only to self-employment income. If you also have employment or other income, it's taken out before the gross-up and added back afterwards.
Will the lender use my best year or an average?
Usually not your best year. Most lenders look at both years:
If your income went up, many lenders average the two years. A few will use the latest year when the increase is reasonable and steady.
If your income went down, expect the lender to use the lower, more recent year.
This is where timing matters. A big one-time write-off in the most recent year can drag down both the average and the "lower year" test. If you're planning to buy, talk to your broker before your accountant finishes the return, not after. I cover this in more detail in Can Self-Employed People Get a Mortgage in Ontario?.
What if I owe money to CRA?
Lenders read the balance owing on your Notice of Assessment. If you owe income tax, most lenders will want it paid before closing, sometimes from the mortgage proceeds on a refinance.
Unpaid GST/HST deserves extra attention. A 2020 Federal Court of Appeal decision held that CRA's deemed trust for unpaid GST/HST can follow the property and reach a mortgage lender. Lenders know this, so HST arrears can stop an approval cold. If you're behind on HST, get a current CRA statement of account and a plan to pay it before we apply.
Why does it matter that your broker is a CPA?
Most underwriters see hundreds of returns a month, and they read them quickly. If your file arrives with line 13500 and nothing else, that's often the number you get approved on.
When I send a self-employed file, the lender gets the income already worked out: which add-backs apply, which method helps you most, how the two years compare, and an explanation of anything unusual, like a one-time equipment purchase or a slow year. That usually means a cleaner approval.
I also know which lenders treat self-employed income generously and which don't. Some A lenders are flexible on add-backs. Others stick close to line 15000. When the T1 doesn't tell the whole story, there are alternative lenders who use bank statements and a reasonableness test instead.
Ready to see what your return supports?
If you're self-employed anywhere in Southwestern Ontario, send me your last two T1 Generals and NOAs and I'll show you what a lender is likely to see, before you apply anywhere. You can see the full range of mortgage services I offer, or check the communities I serve across Strathroy, London and the surrounding area.
Call or text 519-670-3205, or reach out through the contact page.
Tyler Stiller is a CPA (since 2013) and a licensed mortgage broker (FSRA #M20002930) with Dominion Lending Centres National Ltd. (brokerage FSRA #12360), based in Strathroy and serving Southwestern Ontario. Lender rules change, and every lender applies its own policies. This article is general information, not tax or financial advice for your situation.
