How do lenders view rental income from tax returns?

[Mike M.]

Hopefully someone can help me understand this, as it’s a delicate balance. I’m incentivized to deduct as many legit expenses as possible to lower my tax liability but on the other hand this may hinder how a lender views my debt to income.

Is there a best way to look at this on each property? I would hope they add back interest and depreciation- so should I have that net income number (after adding back interest and depreciation) be 1.25x of my mortgage principal and interest?

Thank you

FYI this is for residential lending

[Elise Marquette]

@Jimmy Woodard If it's something like AirBnB, they wouldn't consider the contracts for that because it isn't considered stable and reliable income that is likely to continue. If it's something that you've filed on your tax returns and show income that way, then we use the tax returns because that shows you have a history of earning income doing it for a period of time