What 'Accredited Investor' Means in 2026 — and How 506(c) Verification Works

The income, net worth and credential routes to accreditation, plus what a 506(c) fund must do to verify you and what that process actually involves.

Apurva Sanghavi · October 2, 2026 · 15 min read

The tests, current as of 2026

For an individual, there are three routes.

Income. More than $200,000 of individual income in each of the two most recent years, or more than $300,000 of joint income with a spouse or spousal equivalent in each of those years, together with a reasonable expectation of reaching the same level in the current year. You cannot mix the tests: if you rely on joint income, the threshold is the joint one. The rule looks at each of the two years separately, so a single exceptional year does not qualify you.

Net worth. Individual net worth, or joint net worth with a spouse or spousal equivalent, exceeding $1,000,000, excluding the value of the primary residence. The exclusion has mechanics that surprise people, covered in the next section.

Professional credentials. Since the SEC's 2020 amendments, a natural person holding a Series 7 (General Securities Representative), Series 65 (Investment Adviser Representative) or Series 82 (Private Securities Offerings Representative) licence in good standing qualifies regardless of income or net worth. There is no wealth requirement attached to this route. The SEC has the ability to designate further credentials by order.

Two further categories catch people who do not know they qualify. Directors, executive officers and general partners of the issuer are accredited with respect to that issuer's offering. So are "knowledgeable employees" of a private fund with respect to that fund.

"Spousal equivalent" means a cohabitant occupying a relationship generally equivalent to that of a spouse. It was added so that unmarried partners could aggregate income and net worth.

What counts toward net worth and what does not

The primary residence exclusion is the part that trips up the largest number of otherwise qualified people, because it works in two directions.

The home's value comes out of assets. That is the well-known half. The less well-known half is the treatment of the mortgage. Debt secured by the primary residence, up to the home's fair market value at the time of sale of the securities, is generally not counted as a liability either. The logic is symmetry: if the asset is excluded, the debt against it should be too.

Two exceptions bite.

Underwater mortgages. If the mortgage balance exceeds the home's fair market value, the excess counts as a liability. A home worth $600,000 with a $700,000 mortgage puts $100,000 of liability on your balance sheet.

Recent borrowing. If the mortgage debt on the primary residence increased in the 60 days before you purchase the securities, and the increase was not incurred to acquire the residence, the amount of the increase counts as a liability. This closes the obvious workaround of taking $500,000 of cash out of your house the week before you invest, which would otherwise convert excluded home equity into countable cash.

Everything else is ordinary arithmetic. Assets include cash, brokerage and retirement accounts, investment real estate at fair value, business interests, notes receivable and the cash value of life insurance. Liabilities include mortgages on investment property, margin loans, credit cards, student loans, car loans, business debt you are personally liable for and taxes owed. Do the sum honestly, because you will be asked to represent to it in writing.

Entities, trusts and retirement accounts

Entities generally. An entity qualifies if all of its equity owners are themselves accredited investors, which is the route most small family LLCs use. Separately, many entity types qualify with more than $5,000,000 in total assets provided the entity was not formed for the specific purpose of acquiring the securities offered. The 2020 amendments added a catch-all for entities owning "investments" in excess of $5,000,000 and not formed for the specific purpose, which swept in LLCs and various entity forms that the older list did not name. Registered investment advisers, exempt reporting advisers and family offices with at least $5,000,000 under management (along with their family clients) also qualify.

Trusts. A trust with total assets over $5,000,000, not formed for the specific purpose of the investment, whose purchase is directed by a person with the knowledge and experience to evaluate it, qualifies. Separately, a revocable living trust is commonly treated as accredited by looking through to its grantors, on the basis that the grantors can revoke and are the true owners, where those grantors are themselves accredited. Irrevocable trusts are harder and depend on the terms. This is a place to ask counsel rather than assume.

Self-directed IRAs. A self-directed IRA investing in a private fund is generally treated as accredited where the individual beneficial owner of the account is an accredited investor, and the verification is performed on that individual rather than on the account. The custodian signs the subscription documents in the account's name at your direction, but it is your income or net worth that is tested. Our fund is self-directed IRA eligible, and the investing account receives a Schedule K-1 like any other member. Unrelated business taxable income and unrelated debt-financed income are separate questions covered in our self-directed IRA guide.

Employer plans. An employee benefit plan under ERISA qualifies if it has total assets over $5,000,000, or if investment decisions are made by a plan fiduciary that is a bank, insurance company, savings and loan association or registered investment adviser. For a self-directed plan, the test is whether the participants directing the investment are themselves accredited. A solo 401(k) is usually analysed through that last route.

506(b) versus 506(c)

Both are safe harbours under Regulation D that allow an issuer to sell securities without registering them. The trade-off between them is advertising against verification.

	Rule 506(b)	Rule 506(c)
General solicitation and advertising	Not permitted	Permitted
Who may purchase	Accredited investors, plus up to 35 sophisticated non-accredited investors	Accredited investors only
Accreditation evidence	Issuer may generally rely on the investor's written representation	Issuer must take reasonable steps to verify
What this means for you	Tick a box in the subscription agreement	Hand over documents or a professional's letter
Typical relationship	Pre-existing substantive relationship required before the offer	May be found through a public website or advertisement

That table explains something people find irritating without knowing why. A fund whose terms you found on a public website has, by publishing them, given up the right to take your word for your own accreditation. The verification burden is the price of the advertising, and it is imposed on the issuer, not on you, which is why the issuer chases the paperwork.

Matador Note Fund 1 LLC is offered under Rule 506(c). Accredited status is independently verified, without exception.

What verification actually involves

Rule 506(c) requires "reasonable steps to verify" and provides a non-exclusive list of methods that are deemed to satisfy it for natural persons. Three routes cover nearly everybody.

A professional's letter. Written confirmation from a registered broker-dealer, an SEC-registered investment adviser, a licensed attorney or a certified public accountant that the person has taken reasonable steps to verify your status within the previous three months and has determined you are accredited. This is the cleanest route if you already work with any of those professionals. What you hand the issuer is a one-page letter. What you hand your CPA or attorney is whatever they ask for, and that stays with them.

Income documentation. Review of IRS forms reporting income for the two most recent years, which means W-2s, 1099s, Schedule K-1s or Form 1040, together with your written representation that you reasonably expect to reach the same level in the current year. If you are relying on joint income, your spouse or spousal equivalent provides the same.

Net worth documentation. Review, of documents dated within the previous three months, of assets and liabilities: bank and brokerage statements, certificates of deposit, tax assessments and independent third-party appraisals on the asset side, and a consumer credit report from at least one nationwide reporting agency on the liability side, plus your written representation that all liabilities have been disclosed.

A third-party verification service performs one of the above on the issuer's behalf, typically through a secure upload portal, and issues a certificate to the issuer.

For completeness: in a March 2025 no-action letter to Latham & Watkins LLP, the SEC's Division of Corporation Finance indicated that a sufficiently high minimum investment amount, at least $200,000 for natural persons, combined with specific written representations and no contrary knowledge, can constitute reasonable steps. That route is not available to us, because our minimum investment is $50,000.

Our workflow. You request the investor package. You complete the subscription documents, including the accreditation questionnaire, which asks which category you are relying on. You then choose one of two paths: a letter from your own CPA, attorney or registered investment adviser, dated within 90 days, on their letterhead, confirming they have verified your status; or a third-party verification service, to which you upload documents directly. We tell you which is faster for your situation when we send the package. Once verification is in hand and the subscription documents are countersigned, funding is arranged. For an IRA subscription the custodian's paperwork runs in parallel and is usually the longest pole.

Published turnaround figures from leading third-party verification platforms (Verify Investor, Parallel Markets and similar services, as of 2026) cluster around 24 to 48 hours when your documentation is complete at submission, with same-day results common and a rush option typically available — faster, in most cases, than waiting on a CPA or attorney letter.

Privacy

This section exists because the question gets asked in almost every call and is almost never addressed in writing.

What we see. If you use the professional letter route, we see the letter: your name, the professional's name and credentials, the date, and a statement that you qualify. We do not see your tax returns, your account balances or your credit report. If you use a third-party service, we see that service's certificate, which contains the same limited information.

What the verifier sees. Your CPA, attorney or adviser already has your financial information; that is why the route is convenient. A third-party service sees whatever you upload: tax forms, statements, or a credit report pulled with your consent. That relationship is between you and them, governed by their own privacy policy and terms, which you should read rather than click through.

What is retained, and for how long. We retain the verification evidence we receive, meaning the letter or certificate, together with your subscription documents, because Rule 506(c) puts the burden of proving reasonable steps on the issuer and that burden does not expire when the offering closes. We keep it for the life of your investment and for the period required afterwards by our records policy and by the SEC's rules. Verification services have their own document retention and deletion policies; several delete underlying source documents after issuing the certificate, and you can ask before you upload.

What you should decline to do. You are not required to email tax returns or brokerage statements to a fund manager's ordinary inbox. If any issuer asks for that, ask for the verification service or the professional letter route instead. Unencrypted email is a poor place for a Form 1040, and a manager who does not mind is telling you something about how they handle the rest of your data.

How often you re-verify

Verification is point-in-time. The documentation routes look at a three-month window, and the income route at the two most recent tax years.

In practice, issuers re-verify either annually or at each new investment, whichever comes first, and many take the more conservative of the two. If you make a second subscription eighteen months after the first, expect to verify again. If you are a continuing investor in an open-ended fund and make no further purchase, re-verification is generally tied to the next purchase rather than to the mere passage of time.

Two pieces of practical advice. Ask your CPA to date the letter close to when you expect to fund, not months in advance, because a stale letter means doing it twice. And if you qualify by credential rather than by wealth, this is the easiest re-verification in the world: your registration either remains in good standing or it does not.

If you do not qualify

Then you do not, today, and there is nothing embarrassing about it. The threshold is a regulatory line drawn in 1982 and adjusted rarely; it is not a judgement about your competence, which is precisely the criticism levelled at it by people who would like it reformed.

What is genuinely available meanwhile. Publicly traded mortgage REITs and business development companies give exposure to real estate credit with daily liquidity and full public reporting, at the cost of equity-market volatility that private loans do not display. Interval funds and certain Regulation A offerings accept non-accredited investors subject to investment limits tied to your income or net worth. Bank certificates of deposit and Treasury securities pay what they pay and carry very different risk. Direct private lending in your own name is legal and is not a securities transaction at all, though it concentrates into one loan the risk a fund spreads across many, and it puts the underwriting, the servicing and the foreclosure on you.

What to avoid is the workaround. Being added to someone else's subscription, forming an entity for the purpose of investing, or representing income you do not have are all bad ideas, and the last is a false statement in a document you sign.

The credential route is a real path for some people. A Series 65 requires passing an examination and does not require sponsorship by a firm in most states. For a professional who intends to invest in private offerings repeatedly, that is a legitimate and deliberate route rather than a workaround.

Frequently asked questions

Q: What is an accredited investor in 2026?
A: Under SEC Rule 501(a) of Regulation D, a natural person generally qualifies with income above $200,000 individually, or $300,000 with a spouse or spousal equivalent, in each of the two most recent years with a reasonable expectation of the same this year; or net worth above $1 million excluding the primary residence; or by holding a Series 7, Series 65 or Series 82 in good standing. Confirm current thresholds at sec.gov before relying on them.

Q: How do I prove I am an accredited investor?
A: In a Rule 506(c) offering you cannot simply tick a box. The usual routes are a written confirmation from a registered broker-dealer, SEC-registered investment adviser, licensed attorney or CPA dated within the previous three months; a third-party verification service that reviews your documents; or direct review of tax forms for the income test, or asset statements plus a credit report for the net worth test.

Q: What is the difference between 506(b) and 506(c)?
A: A Rule 506(b) offering cannot be generally solicited or advertised, and may accept an investor's own written representation that they are accredited. A Rule 506(c) offering may advertise publicly, and in exchange the issuer must take reasonable steps to verify each purchaser's accredited status. For you the practical difference is paperwork: 506(c) means handing documents or a professional's letter to someone.

Q: Does my home count toward accredited investor net worth?
A: No. The value of your primary residence is excluded from assets under Rule 501(a)(5). The mortgage on it is generally excluded as a liability up to the home's fair market value, with two exceptions: any mortgage balance above fair market value counts as a liability, and any increase in that mortgage debt in the 60 days before you invest, other than to acquire the home, also counts as a liability.

Q: How long does accreditation verification take?
A: Usually days rather than weeks, and the timing depends mostly on you. A third-party service reviewing uploaded documents generally turns around quickly once everything is submitted. A letter from your CPA, attorney or registered investment adviser depends on that professional's schedule, so request it early. Gathering two years of tax forms or a current credit report is normally the slowest step.

If you are ready to start verification, ask for the investor package and tell us whether you would rather use your own CPA or attorney or a third-party service. We will send the exact document list for whichever you choose.

Important disclosures. This article is for informational purposes only and is not an offer to sell or a solicitation of an offer to buy any security. Any offer is made only through the Private Placement Memorandum, Operating Agreement and Subscription Agreement of Matador Note Fund 1 LLC, which govern in all cases and should be read in full, including the risk factors. Interests are offered only to accredited investors as defined in Rule 501 of Regulation D, pursuant to Rule 506(c); accredited status must be independently verified. Real estate debt investments involve significant risk, including possible loss of principal. The 8% preferred return is non-cumulative and is payable only from available distributable cash at the manager's discretion; it is not guaranteed. The 8–12% figure is a target objective, not a promise or projection of results. Targeted returns are not guarantees of future performance, and past performance is not indicative of future results. Figures describing prior lending are the manager's own lending record and are not audited fund performance. Nothing here is legal, tax or investment advice. Matador Lending LLC is not a registered investment adviser.