Which document is typically required to substantiate annual income in USDA loan applications?

Tax returns are a critical component in verifying annual income for USDA loan applications. They provide a comprehensive view of an applicant's financial situation over a specific period, usually the last two years. This documentation includes all sources of income, such as wages, self-employment earnings, interest, dividends, and other forms of income that contribute to the applicant's total annual income.

By assessing tax returns, lenders can ensure that the income reported by the borrower is accurate and consistent with the income required to qualify for the loan. This helps in evaluating the borrower’s ability to repay the loan and aids in making sound lending decisions. The detailed nature of tax returns allows for a thorough review of the applicant's financial health, ensuring that all income is accounted for properly.

The other options do not provide the comprehensive income verification needed for the loan application process. Social Security cards serve to identify individuals but do not document income. Proof of residency establishes where a borrower lives but does not reflect their financial situation. Driver's licenses are identification documents and do not provide any income-related information.