Definition
For an incorporated self-employed worker, mortgage qualification depends directly on how income is extracted from the corporation:
**Scenario 1: Salary (T4)** If the owner pays themselves a salary from their corporation, the T4 is accepted as normal employment income. This is the most favorable structure for mortgage qualification — same treatment as an employee.
**Scenario 2: Dividends** Dividends have no T4. Some lenders accept dividends from the last 2 years (T1 average). B-lenders are more flexible. The key: document stability and future capacity.
**Scenario 3: Salary + dividends combination** Both sources are added, subject to documentation (T4 + T1 Generals).
**The tax optimization problem**: a business owner who maximizes deductible expenses to reduce tax presents a low net taxable income — which reduces their mortgage qualifying income. There is a real trade-off between annual tax savings and mortgage borrowing capacity.
Alternative solution: B-lenders and some A-lenders have 'stated income' programs for self-employed workers, using gross income or undeducted business income.