Who Is an Accredited Investor? SEC Income and Net Worth Tests
The SEC's Rule 501(a) decides who can invest in most private funding rounds. The tests for individuals and entities, how startups verify them, and the changes the SEC proposed in 2026.
An accredited investor, under SEC Rule 501(a), is a person with income above $200,000 a year ($300,000 with a spouse or partner) in each of the last two years, or net worth above $1 million not counting a primary home, or a holder of the Series 7, 65 or 82 license. Certain entities and insiders also qualify. The definition decides who may invest in most private funding rounds, and the offering’s subscription documents ask you to confirm which test you meet.
What are the income and net worth tests?
Individuals can qualify on income or on net worth. The text is in 17 CFR 230.501(a), and the figures below are current as of November 2026. They are not indexed to inflation.
| Test | Threshold | Details |
|---|---|---|
| Individual income | Over $200,000 in each of the two most recent years | Plus a reasonable expectation of the same level this year |
| Joint income | Over $300,000 in each of the two most recent years | With a spouse or spousal equivalent; same expectation for this year |
| Net worth | Over $1 million, alone or jointly with a spouse or spousal equivalent | Primary residence excluded as an asset; see below for the mortgage |
| Professional license | Series 7, Series 65 or Series 82 held in good standing | Designated by SEC order in 2020 |
| Insider of the issuer | Director, executive officer or general partner of the company selling the securities | No income or net worth test |
| Knowledgeable employee | Certain employees of a private fund, for investments in that fund | Defined by the Investment Company Act rules |
How is the home treated in the net worth test?
Your primary residence is left out as an asset. Mortgage debt on it is also left out, up to the home’s estimated market value. Two exceptions apply: debt above the home’s value counts as a liability, and any increase in home-secured debt in the 60 days before the investment counts as a liability too (unless it came from buying the home). That 60-day rule stops people from borrowing against a house to inflate their net worth on paper.
Which companies and funds count as accredited investors?
Rule 501(a) lists many kinds of entities, including:
- Banks, registered broker-dealers, insurance companies, registered investment companies and investment advisers.
- Corporations, partnerships, LLCs, business trusts and 501(c)(3) charities with total assets over $5 million that were not formed to buy the securities being offered.
- Trusts with assets over $5 million directed by a sophisticated person.
- Any entity in which every equity owner is an accredited investor.
- Other entities owning “investments” over $5 million, and family offices with assets under management over $5 million, along with their family clients.
Why does accredited status matter in startup funding?
Most venture rounds are sold under Regulation D Rule 506, which lets a company raise any amount without registering the offering with the SEC. The rule has two versions, and they treat accredited status differently.
| Rule 506(b) | Rule 506(c) | |
|---|---|---|
| Advertising and general solicitation | Not allowed | Allowed |
| Non-accredited investors | Up to 35 who are financially sophisticated, with extra disclosure | None; every buyer must be accredited |
| Checking status | Reasonable belief, usually a questionnaire | Issuer must take “reasonable steps to verify” |
In practice, most startups sell only to accredited investors even under 506(b), because selling to non-accredited buyers triggers disclosure requirements similar to a registered offering. Companies report these sales on Form D; our guide to Form D filings explains what they show. For how rounds are structured, see how startup funding rounds work. Early checks are often written on a SAFE, which is sold under the same Regulation D rules.
How do startups verify that you are accredited?
Under Rule 506(c), the issuer must take reasonable steps to verify status. Rule 506(c)(2)(ii) lists methods that count automatically:
- For the income test: reviewing IRS forms that report your income for the last two years, such as W-2s, 1099s or tax returns, plus your written statement that you expect to qualify this year.
- For the net worth test: reviewing bank, brokerage and similar statements and a consumer credit report, dated within the prior three months, plus your written statement that all liabilities are disclosed.
- A written confirmation, dated within the prior three months, from a registered broker-dealer, an SEC-registered investment adviser, a licensed attorney or a certified public accountant who has verified your status.
A March 12, 2025 SEC staff no-action letter added another path: an issuer that requires a minimum investment of at least $200,000 from individuals (or $1 million from entities), gets a written representation that the buyer is accredited and that the minimum is not financed by a third party, and has no knowledge to the contrary can treat that as reasonable verification. Staff letters are not rules, but issuers rely on them.
Is the accredited investor definition changing?
The thresholds have not changed as of November 2026, but the SEC has proposals out. On September 30, 2026, the SEC requested public comment on adding new ways for individuals to qualify under the professional-credential category: a passing score on an accredited investor exam that FINRA would develop, and holding a US CPA license, the CFA charter, the CFP certification, or the Series 79, 86 or 87 licenses. Comment periods run 60 days from publication in the Federal Register. None of these designations is in effect until the SEC issues a final order.
Bottom line
If you plan to invest in a 506(c) round, gather the last two years of W-2s or tax returns (income test) or recent account statements and a credit report (net worth test) before you are asked; verification letters from a CPA or attorney must be dated within three months of the purchase. If a credential is your route, watch for the SEC’s final orders on the 2026 notices before relying on a CFA, CFP or CPA alone.
FAQ
Does my 401(k) count toward the $1 million?
Net worth includes assets such as retirement accounts and brokerage accounts, minus liabilities; only the primary residence and its qualifying mortgage are excluded. The issuer’s questionnaire shows how it asks you to calculate.
Can a non-accredited investor invest in a startup?
Yes, through some routes: up to 35 sophisticated investors in a 506(b) offering, or through Regulation Crowdfunding and Regulation A offerings, which have their own investment limits.
Do I have to prove I am accredited every time?
For 506(b) deals, a signed questionnaire is usually enough. For 506(c) deals the issuer must verify, though a third-party verification letter can often be reused within its three-month window.
