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Ask The Experts: Question of the Week

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Fannie Mae & Freddie Mac – Handling a K-1 Section 179 Expense


If the K-1 shows a Section 179 Expense in box 11, does this need to be deducted from the Ordinary Income showing in line 1 of the K-1 when calculating self-employment income?


No, Section 179 is not included in any way in the income calculations. The best suggestion I can make is to use the Self-employed income analysis forms from Fannie (Form 1084) or Freddie (Form 91) for self-employed income analysis. By following these forms, you will be following all of the available add-backs and line items they expect to be used on any self-employed business filing method.

More detail:

Section 179 Expense—This is a one-time write-off the first year something is placed into service versus depreciation over time, and lenders utilize the depreciation approach vs. the Section 179 approach based on agency guidelines.

Summary: Do Fannie Mae & Freddie Mac still allow Sec 179 Expense to be added back since it is effectively front-loaded depreciation? – No, this is not allowed.