Tax-free tips could unlock FHA mortgage approvals for 4 million workers
MP
Maeve Prescott
FHA loan rule change · Apr 15, 2026
Source: DojiDoji Data Terminal
Tip workers may now qualify for FHA mortgages by declaring more of their earnings. The 'no tax on tips' law allows workers to claim up to $25,000 in annual tip income without federal tax consequences.
Lenders use these declared earnings to calculate debt-to-income (DTI) ratios, which the Federal Housing Authority (FHA) uses as a critical threshold for mortgage approval. A higher declared income lowers the DTI ratio.
For a couple earning tip wages, a combined monthly income of $2,750 would put a $1,200 monthly housing cost at a 43.6% DTI ratio, exceeding the FHA's 31% ceiling. By declaring $25,000 each in annual tip income, that couple's monthly income rises to approximately $4,833, dropping the DTI ratio to 24.8%.
FHA loans generally require a two-year history of stable employment and income. The FHA also considers a back-end DTI, which includes total debt including car, student loan and credit card payments, with a typical maximum of 43%.
This policy change may help approximately 4 million people buy their first home or upgrade.
FHA loan rule changecrypto IRS ruling
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