How is rental income verified?

Your lender will ask for the most recent year’s federal tax return to verify your rental income. They will review the Schedule E of the tax return to verify your rental income, after all expenses (minus depreciation). Since depreciation is a paper loss, it will not be counted against your rental income. If you have not owned the rental property for a complete tax year, they will ask for a copy of any leases you have executed and they will estimate the expenses of ownership.