They may also ask for up to three years worth of taxes so taking the hit for one year won't make a total difference. They use the amount on line 150 for what your income is. If you go through a mortgage broker you will have a better chance of getting a loan. We just negotiated for our daughter this summer through a broker as she is self employed. The banks are much stickier about proving income and having a long track record.
Also on the buying a larger house think about what the payments will be and if you can afford it still if your daycare is not full as our numbers can fluctuate. Also if you have young children of your own - ie under age 6 consider how Bill 10 y effect the number of spaces in your daycare.