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Income Standard

One of the primary ways for individuals to qualify as an accredited investor is through the income standard, as defined by the Securities and Exchange Commission (SEC).

Understanding the Income Standard​

To meet the SEC’s income standard, individuals must satisfy one of the following conditions:

  1. Individual Income: The individual must have earned an annual income of at least $200,000 in each of the two most recent years.

  2. Joint Income: The individual and their spouse or domestic partner must have earned a combined annual income of at least $300,000 in each of the two most recent years.

The income can include salary, bonuses, commissions, pension, and other earnings. In both cases, the individual(s) must have a reasonable expectation of reaching the same income level in the current year.

 

Documenting Income​

Investors should provide documents to verify their income. Acceptable documentation includes:

  • Tax returns
  • Form 1040
  • Form 8879
  • W-2 forms
  • Form 1099
  • K-1 forms
  • Pay stubs
  • Statements by an accountant or attorney

This verification process ensures compliance with SEC regulations and safeguards the investor and their issuer against potential legal issues.

Investor FAQs​

  1. I made more than $200,000 in each of the last two years, and my spouse made $50,000 in that same period. Are we both considered accredited investors?:

    • You would be considered an individual accredited investor, but your spouse would not because your joint income did not exceed $300,000 in each of the two previous years. The issuer would only be able to accept you as an investor under Regulation D, Rule 506(c).

  2. I made less than $200,000, but my partner makes more than $300,000 in each of the last two years and expects to do so for the foreseeable future. Am I an accredited investor?:

    • Both your partner and you are considered accredited investor if

Conclusion​

Meeting the SEC's income standard is a straightforward way for individual investors and their spouses or spousesal equivalents to qualify as accredited investors. By maintaining an individual income of $200,000 or a joint income of $300,000, and having a reasonable expectation of continuing to earn at that level, investors can access private investment opportunities such as 506(c) offerings.