Tenant Income Verification

Tenant income verification is an essential financial screening to qualify an applicant to rental standards. Independent verification of income is necessary to confirm the applicant’s self-reported income as shown on the application. Verification of the applicant’s income provides the landlord with preliminary data regarding the applicant’s income to rent ratio and some assurance that the applicant has been truthful on his application.

Income screening is important to determine potential financial risk to the landlord’s business by a tenant rent default. Rent defaults of missed rent or chronic late payments of rent are of great concern for most landlords. The applicant’s financial ability and timely payments of debt obligations are important decisioning factors in the tenant selection process. The first screening in determining financial ability is income verification.

Income verification conducted early in the application process is a pacing measure that can efficiently move the process of filling a vacancy forward to help reduce days in vacancy. The landlord should have a defined policy and practice for income verification in compliance with applicable landlord-tenant regulations and restrictions by statute and ordinance.

Traditionally income verification was employment verification to determine whether the applicant’s earnings were sufficient to qualify to rental standards. Employment wages have long been considered a steady, stable source of income that could be reliably verified and generally counted on as a dependable means of rent payment.

Source of Income Fair Housing Protections

However, income can be derived from a variety of sources other than employment wages. Some states, cities, and counties have passed fair housing laws to include source of income protections. However not all source of income laws offer equal protection from housing discrimination. There is significant difference in the strength and effectiveness of current laws. While some laws provide specific source of income protections by source name, other laws use more generalized language to refer to source of income protections. Housing Choice Vouchers may be explicitly named as a protected source of income in some localities but may be specifically excluded from source of income protections in other localities. It is the landlord’s duty to research applicable laws for the location of his rental property to determine his fair housing requirements.

As a protected class by state, city, or county statute/ordinance, source of income (SOI) protection must be incorporated into the landlord’s fair housing policies and rental practices. A landlord cannot reject a rental applicant on the basis of the applicant’s source of income as long as the income is from a lawful source. In many of these states and localities, source of income protection includes rental assistance through participation in the Housing Choice Voucher program. Per statute or ordinance a landlord cannot refuse to accept the applicant’s Housing Choice Voucher in evaluating rental qualifications.

Source of income discrimination can take many forms, as evidenced in rental advertising, qualification requirements, and rental policies and practices. In rental housing, source of income discrimination occurs when:

  • A landlord’s rental criteria requires specific income documentation such as copies of pay stubs, typically only available to individuals employed as a wage and hour worker or salary employee.
  • A landlord charges a higher rent for an applicant with a source of income other than wages or salary, requires a co-signer/guarantor, or requires a higher security deposit.
  • A landlord sets different rental terms and conditions, or places restrictions on the use of rental facilities or services for tenants utilizing housing assistance vouchers.

Fair housing protections for source of income do not prohibit a landlord from setting his rental criteria to include income qualification. However, if the landlord does require the applicant to have a certain income to qualify for housing, the landlord must subtract any payment from a subsidy program from the total monthly rent to determine the amount of rent that the tenant would pay out of pocket. The landlord must include all sources of income in the tenant’s total income when calculating income eligibility for any tenant.

Income screening must be compliant with specific state and local landlord-tenant requirements for tenant screenings, such as some localities’ requirements for low-barrier tenant screenings that have a lower qualification income to rent ratio (e.g., 2.5:1 or 2:1 income to rent ratio) or fair access in renting housing requirements.

Lawful Sources of Income

Verification of income means that the amount of the income can be proven or that the receipt of the income can be proven. An applicant must be able to provide written documentation that shows either the amount of income or that the income has been received. The written documentation should name the source of the income for proof of income. An applicant can provide multiple documents that together identify the source of income and the amount of receipt.

Lawful sources of income may include but are not limited to the following:

  • Earnings
    • Wages and salaries
    • Self-employment
  • Investments
  • Pensions
  • Private benefit programs
  • Mutual funds
  • Stocks and bonds
  • Rental real estate
  • Benefits
  • Social Security benefits
  • Supplemental Security Income (SSI)
  • Unemployment insurance benefits
  • Disability benefits
  • Workers compensation benefits
  • Assistance programs
  • Housing Choice Vouchers (Section 8)
  • Temporary Assistance for Needy Families (TANF)
  • Veteran Affair’s Supportive Housing (VASH)
  • Short-term emergency grants from state and local agencies for rental assistance
  • Assistance programs from community service agencies, non-profit organizations, or charitable organizations
  • Court awarded settlements
  • Alimony
  • Child support
  • Judgments

As the first step in the verifying an applicant’s income, a landlord will need to request appropriate documents to verify the income.

Wage and Salary Employment

Proof of current employment and wages or salary income for applicants can be verified by the applicant providing copies of the most recent paycheck stubs, and/or the landlord’s confirmation of the applicant’s income by contacting the employer directly. A landlord could request a copy of the applicant’s previous year W-2 income statement for comparison of last year earnings to projected earnings for the current year. A landlord could also request a copy of the applicant’s filed tax return for the previous two years for verification purposes.

The base rate of pay and scheduled hours per pay period should be used for income qualification. Overtime hours and/or bonus pay should not be used in determining annualized income because amounts and frequency are not controlled by the applicant.


A 1099 tax form, most often a Form 1099-Misc, is used to report earnings of individuals who are self-employed. While it may be of benefit to the landlord to request copies of the applicant’s 1099 forms, a landlord must keep in mind Form 1099 reporting requirements. A 1099-Misc form does not need to be prepared if the amount of payment is less than $600 for the year. A self-employed individual has the obligation to report all self-employment income on his tax return but may not receive a 1099-Misc form from all employing entities. A landlord can instead request the applicant provide copies of the previous two years filed tax returns to document his income. A landlord could also request copies of the applicant’s bank statement as a supporting document to show recorded transactions of income deposits.

Commission/Bonus/Incentive Based Employment

An applicant whose income comes from commissions or incentives will need to provide the landlord with copies of appropriate documents that support the source of income. Appropriate documentation may be copies of tax returns, bank statements, 1099s, or other supporting information.


In some circumstances, cash is a generally accepted means of payment for a variety of goods sold or services performed. Cash employers may not be willing to furnish documentation of employment and proof of cash payments. Workers who work for cash may also work for more than one employer. Cash workers may not be able to provide adequate documentation to prove cash income and stability. A landlord’s policy regarding a cash source of income may provide for conditional acceptance of an applicant, such as a co-signer, or a higher security deposit as applicable if further tenant screenings are satisfactory.

Bank and Financial Statements

A landlord may request copies of the applicant’ bank statements for a specified number of months, usually three to six months, to establish an income history. Bank statements can be supporting documents to confirm paycheck and other income deposits, determine cash reserves, view itemized transaction history including bank overdrafts and returned items, and view account balances. Financial statements such as income and expense statements or statements that show account balances, deposits, and withdrawals can establish a history for income verification and evaluation.

Verification of Non-earned Income

Verification of non-earned income, such as interest, dividends, annuities, Social Security or disability benefits, IRA/401(k) pension distributions, other retirement plan distributions, court-ordered agreements for spousal support, child support or as awarded by settlements, and other investment cash flow and entitlement items, may be verified through copies of official statements provided to the applicant.

Although not commonly used as sources of income for rents, an applicant may plan to use funds from a Workman’s Compensation award, severance payment from an employer, or state Unemployment Benefits. A landlord should carefully analyze documentation provided by an applicant regarding the use of these types of funds. Oftentimes the benefit award period is a short duration or a lump sum amount was awarded. Additional verifications may be needed to determine particulars of awarded benefits and the balance of funds remaining in account that can be distributed.

For income derived from other lawful sources landlord will need to research applicable documentation and supporting information for income verifications.

Comments are closed.