Requesting proof of income is an important part of the tenant screening process. You need to ensure that residents meet income requirements and will be able to pay their rent to protect yourself and your property. The best way to do that is to require proof of income when a renter applies to rent your unit.
Although some methods are more commonly used than others, here are 15 ways renters can show landlords proof of income:
- Pay Stubs
- Bank Statements
- W-2 Income Statement
- Tax Returns
- Formal Letter from Employer
- Social Security Benefits Verification Letter
- 1099 Form
- Annuity Statement
- Pension Distribution Statement (1099-R)
- Worker’s Compensation Letter
- Court Ordered Awards Letter
- Interest and Dividend Income (1099-INT/1099-DIV)
- Severance Agreement
- Proof of Bonus and Incentive Payments
- Unemployment Benefit Award Letter
Key Takeaways
- Proof of income is essential in tenant screening to verify that applicants have a stable income sufficient to cover rent. Landlords commonly require income to be at least three times the rent. Various documents serve as proof of income, each reflecting different financial situations and employment types.
- There are many acceptable documents for income verification. Pay stubs, W-2 forms, tax forms, bank statements, and employer letters are commonly used income verification tools, but there are many additional options.
- Landlords should establish and follow a standardized, thorough process for verifying renter income to safeguard their property and minimize risks. This means requesting multiple forms, reviewing historical patterns, remaining legally compliant with procedures, and being vigilant for fake documents.
What Is Proof of Income?
Proof of income is a verification tool used to show that an applicant has a stable income source and can afford the rent. Most landlords require at least three times the rent, providing a safety net and reducing the risk of missed payments.
Proof of income can come in various forms, each providing a different perspective on a renter’s financial stability. Understanding proof of income is essential as it helps you assess the financial stability of potential tenants and mitigate the risk of non-payment.
Why Proof of Income Matters in Tenant Screening
Proof of income is a critical tool because it provides insight into a potential renter’s financial stability and their ability to meet rent obligations. By verifying a renter’s income, you lower potential financial risks, such as late or missed rent payments. This risk management is important to ensure a consistent rental income stream.
Understanding the significance of proof of income is a crucial step towards successful property management, whether you're a seasoned rental manager or a first-time landlord. Now onto the ways that renters can show proof of income.
1. Pay Stubs
Pay stubs are one of the most common proof of income documents. They show that the applicant has a current, stable income.
You should require at least two to three recent pay stubs to get a sense of how often the applicant is paid, what their gross and net income is, and any fluctuations in pay. Look for details such as the renter’s details, employer information, pay period, gross pay, any deductions and taxes, and the net pay on the document.
2. Bank Statements
Renters who have atypical employment, such as self-employment, won’t receive regular pay stubs, so providing their bank statements from the last two to three months is a great way to show proof of income. If the applicant has a commission-only salary, be sure you’re requesting a few months of their bank statements to determine if their income is steady enough to fit your income requirements.
3. W-2 Income Statement
A W-2 form is a standard document the government uses to verify income for tax purposes. Usually, it is provided by the employer to the employee and contains income information including wages and taxes withheld.
Since a W-2 form only shows the previous year, it doesn’t account for changes such as promotions or raises. Ask about the applicant’s current job situation and request more recent proof of income documents to get a better idea of their financial situation.
4. Tax Returns
The IRS 1040 (Individual Income Tax Return) gives a comprehensive and detailed idea of the applicant’s income. It shows wages from jobs but also other types of income and unearned income, like social security benefits or pensions. Just like W-2s, this might not be representative of the applicant’s current income, so further investigation may be necessary.
5. Formal Letter from Employer
A formal letter from their employer can help you verify that the renter is employed. This is especially useful if the renter recently got a job and doesn’t have any pay stubs yet.
When you request this document from a renter, you can ask for details, such as salary and title, to be included in the letter from the employer. Be aware that the employer does not have to provide those details or may require permission from the employee/applicant.
6. Social Security Benefits Verification Letter or SSA-1099
Often used by retired renters, a social security benefit verification letter proves that the applicant has a stable income coming from the government. The benefits verification letter verifies that the applicant is or isn’t receiving benefits and shows exactly how much the applicant receives, deductions, and when they get the benefit payments.
This is not to be confused with the Social Security Statement, which is mainly for retirement planning and doesn’t show current payments or if the person is actually receiving benefits or not.
Another form that shows social security benefits is the SSA-1099 form. This is issued by the Social Security Administration and shows the total Social Security benefits received in the prior year.
7. 1099 Form
IRS Form 1099 reports various types of non-employee compensation, including self-employment or gig workers. There are multiple 1099 forms. The most helpful ones for proof of income are the 1099-NEC, 1099-MISC, and 1099-K.
If the applicant had multiple sources of non-employee income, they’ll have multiple 1099 forms throughout the year. Request the forms for the past year or two to verify the applicant’s current ability to pay and historical income. Keep in mind that while these forms show what a renter earned in the previous tax year, they do not guarantee that those income sources will continue.
8. Annuity Statement
An annuity is a financial arrangement where a person gets regular, scheduled payments over a period of time. These payments typically come from an insurance contract, an inheritance, or another long-term financial agreement.
Because annuity income can be temporary, it’s important to check whether the annuity has a maturity date or expiration date. This tells you how long the applicant can expect to continue receiving those payments.
9. Pension Distribution Statement (1099-R)
A pension distribution statement is a retiree’s income reported to the IRS. It reports the money the retiree got from pensions, 401(k)s, IRAs, annuities, or other retirement accounts. Social security benefits are not reported on this form; those use the SSA-1099 form.
10. Worker’s Compensation Award Letter
A renter can provide a worker’s compensation award letter (or Benefit Approval Letter) if they were hurt in a workplace accident and are receiving compensation for it. It should be an official document from the insurer, state agency, or court confirming the work injury claim, the payment amount, type of payment, frequency, and benefit dates. There is usually an end to these benefits, so be sure to check the dates.
11. Court Ordered Awards Letter
A court ordered awards letter is official confirmation from a court for money awarded, often from a settlement, alimony, child support, or other judgement. While this shows the court’s final say, it is not confirmation of payment, so you should ask for supporting payment records like bank statements or disbursement statements.
12. Interest and Dividend Income (1099-INT/1099-DIV)
Another non-traditional form of income is investment. This can show a steady income that supplements or even replaces typical earnings when applicants are retired, self-employed, or their primary income comes from interest or investment. To get verify, request a 1099-INT or 1099-DIV form.
A 1099-INT shows how much interest a renter earned during the tax year, while a 1099-DIV outlines dividends and distributions from stocks or mutual funds. Often, the amount is not enough to be the main proof of income, but it can show stable month-to-month earnings.
13. Severance Agreement
When a renter is laid off, they may get a severance agreement. The document includes a lot of information, but the parts that are relevant to you are the employment dates and severance pay.
The severance pay is usually one lump sum; this means that the renter may be able to cover rent for a short period but may not have ongoing income after that. Ask for additional proof of income to prove that they will be able to pay rent after the severance pay runs out.
14. Proof of Bonus and Incentive Payments
Renters who have a commission-based job can provide documentation for proof of bonus or incentive payments. This can take many forms, with common ones being pay stubs, employer letters, contracts, 1099-NEC, or bank statements.
Commission-only renters often have a steady source of income, but it can be difficult to determine if this income is reliable enough to meet your income requirements. Request proof for the past year or more to get a better sense of their income flow.
15. Unemployment Benefit Award Letter
When a worker has become unemployed through no fault of their own and meets other eligibility requirements, they can get unemployment benefits from the state. This usually entails weekly payments for a set number of weeks. This money is steady income that can cover rent, but the exact length the payments are provided is determined by the state program.
If a renter is receiving unemployment benefits, they can provide you with proof through an unemployment benefit award letter. This letter should have information on the weekly payment amount, the maximum amount, and the dates the benefits start and end.
Common Problems You May Face Verifying Income
Income verification is a critical step in evaluating any rental application, but it comes with its challenges. Here’s how to handle common problems when verifying income so you can protect your property and keep screening on track.
Problem: variety of income sources
Landlords often face difficulties verifying income when applicants earn money from multiple or nontraditional sources. Common examples are contract work, gig platforms, seasonal employment, or mixed W-2 and 1099 income.
These situations can make it harder to understand true earning stability, especially when pay schedules are irregular or documentation varies in format and reliability. Without a clear picture of consistent income, assessing an applicant’s ability to meet monthly rent becomes more complex.
Solution: Establish a consistent review process that accounts for diverse income types. Request documentation that reflects long-term earning patterns, such as several months of bank statements or a history of contracts, in addition to recent sources.
Collecting proof from multiple sources provides a more comprehensive view of an applicant’s financial situation, rather than relying on a single source. When necessary, verify information directly with employers or banks.
Problem: privacy concerns
Landlords often need sensitive financial and personal information to evaluate an applicant. You need to balance the need for thorough income verification with respect for the rental applicant’s privacy. This can be particularly challenging when it comes to contacting employers or banks to verify information.
Solution: Be upfront about what information is required, why it is necessary, and how it will be used only for income verification purposes. All personal information must be handled securely with care. Before contacting any verification sources, like a bank or employer, you must have the renter’s permission.
When it comes to contacting employers, you should only ask for basic information such as employment status, job title, and date of hire. Avoid details such as salary, performance, or other confidential and personal information.
Problem: complex laws
Income verification sits at the intersection of several housing laws, including fair housing laws, that provide protections against discrimination and regulations that prohibit source of income discrimination. The rules vary widely by state and city, making it crucial to be familiar with local laws.
Solution: Stay informed about local, state, and federal requirements that govern rental screening, especially laws that protect renters based on lawful income sources. Standardize your evaluation criteria so every applicant is assessed using the same process, and document the steps you take to ensure compliance.
When a situation feels unclear, consult a qualified legal professional to help you navigate the regulations and maintain a fair, compliant screening approach.
Problem: fraudulent proof of income
Fraudulent proof of income poses a financial and operational risk for landlords. Edited pay stubs, fabricated employment letters, or inconsistent bank records make it difficult to assess whether a renter can reliably meet monthly rent obligations.
With today’s technology and digital editing tools, forged documents are harder to spot than ever. If these documents go undetected, landlords face the risk of missed payments, legal action, and lengthy eviction processes.
Solution: Consider requesting multiple proof of income documents to compare them. Keep an eye out for red flags and verify employment and other information directly when possible. If fraud is suspected, pause the application, document the concerns, and seek guidance from a qualified legal professional before taking any next steps.
Proof of Income Red Flags
Remain vigilant for signs of fraudulent documents. Here are red flags to look for in proof of income:
- Inconsistencies
- Formatting issues
- Unprofessional document
- Spelling errors
- Missing or incorrect information
- Suspicious numbers
- Rounded numbers
- “O’s” instead of “0’s”
- Incorrect calculations
If you do encounter these red flags, you should request more information and additional documents. It could be a simple mistake, but you need to be cautious to protect yourself. In the case that you suspect fraud, you should stop the application process, note the issues, and contact a legal professional.
Alternatives to Proof of Income
If an applicant doesn’t meet your income requirements, but you still wish to rent to them, ask them to provide a cosigner or guarantor. Make sure to screen the cosigner or guarantor just as thoroughly as the applicant.
Get All Your Tenant Screening Checks on Apartments.com
In addition to verifying an applicant’s income, you also need a reliable way to assess their broader financial and rental history. That’s where Apartments.com Rental Manager’s screening tools help make the process comprehensive and consistent.
With built-in tools, you can run credit reports and background checks that include eviction history, criminal history, and anything else you need to know. These details help you evaluate an applicant’s responsibility beyond income. Screening is fully integrated with online applications, giving you a streamlined way to review supporting documents, compare applicants, and make informed decisions that protect your property.
Frequently Asked Questions
Can proof of income for a rental property be faked?
Yes, proof of income can be faked, which is why you need to be cautious when verifying proof of income. It’s best to require two or three documents to verify a tenant’s income. If you are unsure of something, ask the tenant to explain, or ask them to provide another form of income verification.
Should I deny an applicant who is unemployed?
No, you should not immediately deny an applicant who is unemployed, but you need to make sure they have a steady stream of income that meets your income requirements. Social security, unemployment, workers compensation, and annuity are all valid forms of income verification as long as they meet the requirements.
Is proof of income different for a student?
Proof of income is different for a student as they are usually full-time students with different financial situations. Some have part-time jobs, while others use scholarships or other funding to pay for housing.
Official letters from the funding organization or scholarship stating the amount of funding and the payment schedule should be provided. For students who don’t meet income requirements, you should require a guarantor or cosigner.
This article was originally published on August 3, 2022 by Megan Bullock.
