Applying for an apartment is an exciting time that comes with navigating through paperwork to get into your new place. One of the most important documents you’ll need before being approved is proof of income. Proof of income involves verifiable documents that prove your income is equal to or more than the amount required by your landlord.
For some people, providing proof of income documents is very cut and dry, but not everyone works a traditional job. Just because you’re self-employed, retired, or currently unemployed doesn’t mean you can’t rent. There are many ways to prove income. Here are some ways just about every renter can prove their income and be on their way to getting approved for a new apartment.
Why do apartments ask for proof of income?
We know that proof of income are documents you, the renter, provide your landlord to prove your wages, but why do they need this for a rental application? Essentially, your landlord wants to know that you’re going to be a reliable tenant who will pay rent on time each month. Unless you live in cities with notably high costs of living (i.e., New York and Los Angeles), your landlord will usually require the renter to make more than three times their monthly rent, meaning 30 percent of your annual income should account for rent. If you’re living with roommates, the sum of your wages should be 30 percent of the total rent amount. Normally, you’ll need at least two documents that prove your income, but that is up to your landlord. Some places are stricter than others, but this is just a precaution on their part to avoid fraud.
Sometimes, providing these documents might seem a bit invasive, but it will ultimately help your budget. While some cities have a higher cost of living than others, it’s generally advised to stay within that 30 percent of income range when renting.
What can be used as proof of income?
If you are employed by a corporation and work a traditional nine to five, you have many ways to easily provide proof of income for your new apartment.
Pay stub
A pay stub, aka pay slip, is the most traditionally used option for people who earn consistent pay. A pay stub is the document you receive at the end up of a pay period that shows things like hours worked, amount earned per-hour, year to date earned, tax deductions, insurance deductions, 401K deductions, etc. Normally your landlord will want more than one pay stub to show off a few month’s earnings, and they’ll usually need it to be paired with another verifiable document as pay stubs are easily forged. If you work on commission or make hourly wages and don’t have a steady schedule, pay stubs might not be the best option as your earnings for each pay period differ.
Previous year’s tax return (typically IRS Form 1040)
If you work off of commission or don’t have earnings that can be represented through your pay stub, using last year’s tax return, aka IRS 1040, might work for you. Your tax return shows all sources of income you earned that year. Landlords love this as proof because it’s the most accurate report of earnings, but renters might have trouble tracking this document down or feel that it’s invasive. It also is last year’s form, so if you switched jobs, it might not be accurate.
Bank statements
Bank statements are a great option for employed renters as it can be paired with a paystub or used to represent salary for people who don’t have the same monthly income. A bank statement is a record of your bank account’s balance, deposits, and withdrawals. These give your landlord a gage of your spending habits and income but could also feel invasive to some renters. If you don’t feel comfortable with bank statements, you’re definitely not alone, so know you have other options.
Proof of income letter
Some apartments might require a proof of income letter, a letter typically written by an employer, outlining your income and role at the company. This letter could also double as a letter of recommendation if required. Before asking your employer to write the letter, have your landlord outline exactly what they need in the letter.
Offer letter
You can also use an official offer letter as proof of income as long as it includes your salary. The offer letter might have to be paired with another document, but it’s at the discretion of the landlord. If your credit checks out, the offer letter might be enough proof.
How to Show Proof of Income When You Are Retired or Not Working
Just because you are retired or currently not working doesn’t mean you’re not eligible to rent. You still have many ways to show your earnings.
Pension distribution statement (IRS Form 1099 R)
Pension is similar to a 401K in that it is money earned while you were employed and are now earning on a monthly basis. You can prove your pension earnings via your pension distribution statement, aka 1099 R, on your tax return. The drawback to this form is that it’s easily forged, so your landlord might require it to be paired with another document for verification.
Social Security proof of income letter
If you’re earning social security, you can prove your income through a social security proof of income letter, also called a benefit verification letter, found through your Social Security Account.
Unemployment compensation letter
If you’re receiving unemployment, your federal or state unemployment checks can be used as proof of income. The only drawback is that these checks normally have a stop date, so you’ll need a back-up if your checks end before your lease does.
Interest and dividend income
Interest income is money earned from interest made on savings accounts while dividend income is money earned from stocks and mutual funds. These can be found on your tax return labeled 1099-INT and 1099-DIV respectively. If these earnings cover your rent, this statement is an excellent option in the eyes of your landlord.
Worker’s compensation letter
For people currently earning worker’s compensation, you can use your award letter, typically issued by the insurance company or court awarding the compensation, as proof of income. The drawback here is similar to unemployment checks because it has an end date, so it’s best used for a short-term lease, or if you will have proof of income after the end of the compensation.
Annuity statement
There are many types of annuity. You can receive annuity from inheritance, or if you’re a retiree, you might have a contract with an insurance company where you are receiving fixed payments. The annuity statement is an update on the money being earned and is typically sent out by the insurance company. You’ll need to ask your representative for your statement if you don’t have it.
How to Show Proof of Income if You're Self-Employed
If you’re self-employed and don’t have pay stubs or documents that provide accurate monthly earnings, don’t worry. There are plenty of ways to provide proof of income for self-employed people.
Tax returns (IRS 1040)
Tax returns were mentioned earlier, but it’s worth talking about again as it is the most accurate representation of what you earned during a certain year as it includes all forms of income. Tax returns are also easily verifiable, so landlords appreciate them as proof of income.
Profit and loss statements
Profit and loss statements are financial statements outlining revenue, expenses, and other costs during a certain period of time. These could work great for small-business owners who aren’t comfortable with providing their tax return and don’t have pay stubs.
Bank statements
Like tax returns, bank statements were mentioned above, but are great for those who are self-employed because it shows what you earn versus what you spend.
Invoices/Contracts
If you’re a freelancer or independent contractor, invoices and contracts are great ways to provide proof of income. If you have a long-term project or already have future projects lined up, this is an easy way to prove your wages. The drawback to this method would be if you have multiple simultaneous projects or multiple short-term projects lined up, it might require a lot of paperwork being handed off.
IRS Form 1099
An IRS 1099 form is a document outlining earnings made from sources other than an employer. This would include earnings from things like your interest and dividend income. Because this money is earned from sources other than your job, not everyone will be able to use this form as proof of income. If you do have enough funds, this is a great way to show proof of income, but most people will have to choose a document that shows the income they make through their employer.
Providing proof of income is just one of the steps in getting approved for an apartment. In order to be approved, your income will normally have to be paired with an acceptable credit score. Depending on your situation, you might be approved and ready to go, but that’s not always the case. Sometimes renters are lacking credit, don’t meet the income requirements, have bad credit, or the landlord finds another red flag on the application. If this is the case, you might get approved, but your landlord might require you to have a guarantor or cosigner. A guarantor is someone who signs the lease with you and becomes responsible for payments if the you, the renter, fails to make them. A cosigner takes the same role as the guarantor, but it’s slightly different because a cosigner can live in the unit.
Providing proof of income is a necessary step in the rental process. For both you and your landlord, you’ll want to make sure you’re giving an accurate representation of your earnings. Many places will require two or more documents, so just make sure you pick the ones that you feel most comfortable with giving and accurately represent your income. There are benefits and drawbacks to each choice, so choose the proof of income that works best for your situation.
Published March 29, 2021
