15 Ways a Renter Can Show Proof of Income

Written on April 1, 2017 by , updated on January 2, 2018

I am a banker by day and real estate investor by night. For over 15 years, I have been verifying income for potential tenants because I know that people tend to overestimate how much they can afford.

A classic example of this is when people state that they make $50,000 a year, but after taxes, insurance, and 401K contributions, the net amount they end up with is a lot lower.

Most renters don’t know how much rent they can realistically afford.

In my experience, renters are not maliciously trying to inflate their income; they just don’t consider the effect debt has on their actual earnings. You, however, still need to verify that they have the ability to pay. If you don’t question their stated income, you may not be able to make an educated determination. Again, people often think of gross pay without considering net earnings after expenses.

I cannot overstate the importance of verifying income by doing some basic affordability math to insure the potential renter can afford your rental property. From my experience, lack of funds is the number one reason for eviction, and you can avoid that by verifying income before they move in.

Related: Build credit history just by paying your rent

15 Ways to Verify an Applicant’s Income

1. W-2 – Income Statement

This standard document provides proof of income the government uses to verify income for tax purposes.

  • Pro: This document is produced by an employer and is totally reliable.
  • Con: Most renters don’t have this document readily accessible. Additionally, it does not give an up-to-date picture because it does not account for raises or promotions.

2. 1099 – Miscellaneous Income

The IRS Form 1099  is the document used for the self-employed.

  • Pro: This tax document is easily verified.
  • Con: A self-employed person could have multiple 1099s, and you cannot verify if work, and therefore income, will remain steady throughout the year.

3. Federal Income Tax Return

The IRS 1040 (Individual Income Tax Return) is my personal favorite for verifying income because it’s the most comprehensive. It is a complete document, whereas the potential tenant might not remember all sources of income.

  • Pro: Tax returns never overstate someone’s income, and this is a legal document.
  • Con: It could be hard for tenants to find this document, and it’s a snapshot that may not be totally current.

4. Letter from Employer

This is usually easy to get for tenants. And if the employer gives a reference to the tenant’s work ethic you have increased your comfort level.

  • Pro: Current information and the employer can give some qualitative feedback on the potential tenant.
  • Con: Can be easily forged. Some tenants can open a Word document and add the company’s logo.  I usually call and thank the person who wrote the letter to verify they actually wrote it.

5.  Social Security Statement

  • Pro: Government income that is very stable. Easily verified, consistent, and usually not taxed.
  • Con: Can be stopped if Congress changes distribution rules.

6. Pay Stub

Tenants usually get this document every pay period.

  • Pro: Easy for a tenant to find and is current.
  • Con: Need to verify the document with the employer.

7. Bank Statements

  • Pro: Very current information and also tax adjusted.
  • Con: Intrusive for the tenant and might not be current if tenant has non-traditional income. A good example of this is a tenant who is a commission-only salesperson and shows you only one great month.

8. Annuity Statement

An annuity is a contract between a person and an insurance company where in exchange for a lump sum of cash you are promised a steady stream of cash-flow.

  • Pro: Easily verifiable and is usually consistent income.
  • Con: This money usually has an end date. You should read the annuity statement’s date of expiration.

9. Pension Distribution Statement

This statement on your tax return is called a 1099-R.

  • Pro: Usually a great source of income that is consistent.
  • Con: Tough to differentiate monthly distributions versus annual distributions. Also, the pension can change the distribution amount.

10. Workman’s Compensation Letter

This letter should be issued either by the insurance company or the court awarding the compensation.

  • Pro: Easily verifiable.
  • Con: Usually there is a duration for this type of income. You should read the annuity statement’s date of expiration.

11. Court Ordered Awards Letter

This is a document produced by the court system showing a mandated payment.

  • Pro: This is a court-ordered mandate.
  • Con: The court order can be appealed or at least stalled for a significant amount of time.

12. Interest and Dividend Income

This can easily be found on the tax return or a brokerage statement. On your tax return, there will be a 1099-INT and a 1099-DIV.

  • Pro: Very reliable income.
  • Con: Usually not enough to make a material difference.

13. Severance Statement

This is a document if somebody is laid off.

  • Pro: It usually entails a large cash deposit so the tenant can afford several months of rent upfront.
  • Con: This is usually a one-time influx of cash, which you can’t count on for ongoing rent.

14. Proof of Bonus/Incentive Payments

You definitely want to get documentation for commission-based tenants, like real estate agents and mortgage brokers.

  • Pro: Commission-only tenants can have great income and can be great tenants.
  • Con: Very hard to prove that this income is reliable.

15. Unemployment Statement

A government document that is generated by your state unemployment office.

  • Pro: Guaranteed income from the government.
  • Con: Usually unemployment income runs out at some point.


  • Verify that potential tenants are still at the job they listed and that they plan to stay on the job.
  • If potential tenants don’t have enough income, and you still wish to rent to them, ask for a cosigner. You would then need proof of income from the cosigner.
  • Make sure the renter can also afford the utility bills.

Rent-to-Income Ratio

Cozy Income vs. Rent Calculator

The most commonly accepted way of qualifying an applicant (financially) is to calculate the Rent-to-Income (or RTI) ratio.

The industry standard is that the total monthly household income must be 2-3x the monthly rent.
For example, if the monthly rent is $1,000, then the household must have $2,000 to $3,000 in documented income per month.

If you use Cozy to collect online rental applications, you’ll see an income calculator, which does this analysis for you. Cozy makes it easy for me to see if the household (including all roommates) are qualified together.

Rent Coverage Ratio

An alternative (and more detailed) way to tell if an applicant is qualified financially, is to calculate the rent coverage ratio. Here is how calculate rent coverage, using an example:

Verified monthly after-tax (net) income: $3,800

  • Rent: $1,800
  • Utilities: $200 (estimated)
  • Cable: $120 (estimated)
  • Cellphone: $100 (estimated)
  • Car payment and insurance: $400 (estimated)
  • Renter’s insurance: $150 (estimated)
  • Groceries: $150 / per person

Total Expenses: $2,920

Rent Coverage Ratio: After-tax income of $3,800 / Total Expenses of $2,920 = 1.3

This means that for every $1 in expenses this tenant has $1.30 in cash flow to cover the expense. That is a good healthy margin.  I try to keep my minimum rent coverage ratio at 1.30 or higher.


This article gives you a comprehensive list of ways to verify income. We all want to find good tenants and assure a good experience for ourselves, our clients, and the renters we serve. Unfortunately, some people deliberately falsify documents to get approved, and some make honest mistakes. Either scenario might set up a nightmare situation that we all want to avoid. Take the time to be sure the prospective tenant can pay. You will be glad you did.

If you think I left something off, please tell me in the comments!

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12 CommentsLeave a Comment

  • amanda bellman

    can use disability award letter as income verification.
    other income received from rentals by presenting current lease. Verification by deposits.
    dis you cover a grantor.

    • Darcy Latham

      Good morning! My question is from a renters point of view. I have 3 dependents, single mom, Will Social security income and weekly deposited child support count as income for me so that i can file .

  • Karma Sjourn

    3 times rent and more you suggest.. how is that not discrimination? God forbid anyone is disabled or on a limited income and needs an apartment that is safe! You are encouraging landlords and managers to be even more discriminatory and make it impossible for the disabled and underpaid people in this world to have decent living conditions. Lack of income/money does not make a criminal nor does it make them dead beats! More often.. higher income people do not pay bills that they owe. I would think higher income = waste more and have more “cash flow” problems and wasteful expenditures. Simple more basic people do not waste money on ridiculous things, but we do want decent housing! Why cant our actual history be proof enough?

    • Karen Spelling

      Read the title of the article.
      Most renters don’t know how much rent they can realistically afford.

      It would be ludachrist to put someone in a place they cant afford. Banks screen home buyers to determine what they can or can’t afford. Is that discriminatory? Credit card companies along with every other financial institution regulate based on income to debt ratio. I realize rents are going up, but your comment/post will only lead to even more conflict once the rent is short.

    • linda Kiley

      There are some lower income, handicapped rentals that are in safe areas, but applicants are still monitored by income verification and of course criminal screening. If one has extremely low income, there are programs that do assist in limited areas and help pay rent on a sliding scale. I agree it definitely takes tenacity and hard work to find a community that is suitable for one’s needs and also landlords still do semi-annually or annually income verifications. (Recertification) Property owners require affordability of at least 1/3 of your net income and also most rentals do not include utilities that must be taken into consideration when decision making.

    • Janet

      Ok Karen, the title of the article says “15 Ways a Renter Can Show Proof of Income”. I don’t know why you’d associate it with Karma’s comment regarding 3x-4x income and insinuating it’s not discrimination. I know plenty a few people who make 2x my salary that never pay their credit card bills and spend their money on vacations and a car they can barely afford. With that being said, read the other comments left on this article. There’s people who have many ways to prove income but it’s not enough still.

      As for me, I was fired from a job and have a lot of money saved that could cover 3 years worth of rent. Along with that, I have an unemployment check that could cover every month’s rent for up to 6 months. Still, I get rejected.

    • Ed Schmedly


      You are confusing what you want and prefer, with what is provided to you by default simply for being alive. For the landlord, they are simply running a business. Why don’t you make this argument about cars, or couches, or anything else? Why don’t these sellers of these products not just give them to anyone for any price?

      Because everything costs something.

      Making an emotional plea doesn’t negate the fact that lower income people tend to be less stable, and have a higher chance of not paying rent. Without rent, NOBODY at the complex has a place to stay.

      It has nothing to do with emotions and definitely doesn’t have anything to do with discrimination. Feel free to build your own place if you wish. Don’t rent.


    I am trying to rent an apartment and I have disclosed bank statements, financial aid awards, social security disability benefit letter, my subsidy housing voucher and my miscellaneous income 1099. Yet, the real estate agent insist’s I provide “future verifiable income”. I am wondering if this is a normal practice to ask for “future verifiable income” from a perspective tenant. I am feeling some sort of discrimination is in practice here or am I being paranoid?

  • Ferraro Michael F.

    In California:

    I am attempting to lease an apartment. I have only two sources of income: social security and interest income from savings invested in Trust Deeds. I have been an investor with the same broker for decades. I have submitted 5 years of 1099 INT forms issued to me by the broker reported to IRS, but the apartment “compliance” dept is disregarding it and wants to know how the investments in Fractional Interest Trust Deed works. I have tried to explain but the rental officer doesn’t seem to understand the methodology.

    Can they legally refuse to accept 1099 INT form properly issued and reported to IRS as proof of income?


  • Rohan Dubey


  • William Liggett

    I am in search of a place to live. I have been denied because even though my bank statements shiw a minimum depisit into checking of $3500, I cannot verify where the money is coming from. I am an independent contractor. Most of my work is paid by cash and some 1099, depending on whom i work for. I plan on working a traditional full-time job, but my most urgent need is a place to live. I have the money, but finding it hard to find somebody who will rent to me. And no, I don’t have anybody I could ask to co-sign. What do I do?

  • Kenneth Arnold

    Have two applicants. They are moving in from another state.
    Alone, neither applicant meets rent-to-income standards.
    Together, they do.
    One applicant appears to be relocating but continuing with current employer.
    Other applicant probably does not, as she has a basic job with a small mfg company.
    Can I require proof of *continuity* of employment?
    Again, one income alone is not enough.

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