Who Qualifies as an Accredited Investor? Every Rule 501(a) Category Explained

An accredited investor is any person or entity that falls within one of the thirteen categories listed in Rule 501(a) of Regulation D — or that the issuer reasonably believes falls within one at the time of sale. For individuals, the most-used tests are net worth above $1,000,000 excluding the primary residence, income above $200,000 (or $300,000 jointly) in each of the last two years, or holding a Series 7, Series 65 or Series 82 license in good standing; for entities, the most common test is more than $5,000,000 in total assets or investments.

The definition sits in 17 CFR 230.501(a), and it does more work than any other definition in private capital markets. It decides who may buy in a Rule 506(c) offering, who is excluded from the 35-purchaser cap in Rule 506(b), who is exempt from the per-investor limits in Regulation Crowdfunding, and who is exempt from the 10% purchase limit in a Tier 2 Regulation A+ offering. Getting it wrong at the subscription stage is not a paperwork error; it can put the exemption itself at risk.

The Four Individual Tests

A natural person can qualify in four ways. Only one needs to be met.

Insiders form a fifth route that most founders overlook. Under paragraph (a)(4), any director, executive officer or general partner of the issuer — or of the issuer's general partner — is an accredited investor for that issuer's offering, regardless of income or net worth.

How net worth is calculated

The net worth test is where most self-certification errors occur, because the residence rules are counterintuitive. Under Rule 501(a)(5)(i):

• The primary residence is not counted as an asset, regardless of its value or the equity in it.
• Mortgage debt on the primary residence is not counted as a liability, up to the home's estimated fair market value at the time of sale.
• Underwater mortgage debt counts. Any residence-secured debt in excess of the home's fair market value is included as a liability.
• A 60-day look-back applies. If residence-secured debt increased in the 60 days before the sale — other than to acquire the residence — the increase is counted as a liability. This closes the route of borrowing against a home to manufacture qualifying cash.

Joint net worth is the aggregate of the investor's and the spouse's or spousal equivalent's net worth. The rule's note confirms that assets need not be held jointly to be included, and that relying on joint net worth does not require the securities to be purchased jointly. Rule 501(j) defines a spousal equivalent as a cohabitant occupying a relationship generally equivalent to that of a spouse.

How the income test works

The income test has three parts, and all three must hold: income above the threshold in each of the two most recent years, the same basis (individual or joint) used consistently, and a reasonable expectation of reaching the same level in the current year. A single strong year does not qualify. A founder who crossed $200,000 last year for the first time is generally not yet accredited on income, though the net worth or credential tests may still apply.

The Entity Categories

Entities qualify under paragraphs (a)(1), (2), (3), (7), (8), (9), (12) and (13). The practical groupings are:

Two distinctions matter in practice. First, paragraph (a)(3) measures total assets, while paragraph (a)(9) measures investments — a narrower figure that generally excludes operating assets. Second, the "not formed for the specific purpose" condition blocks the obvious workaround of pooling non-accredited investors into a new vehicle to buy in. An entity formed for that purpose can still qualify under (a)(8), but only if every owner is independently accredited.

What Changed in 2020 — and What Did Not

The SEC's 2020 amendments to Rule 501(a) were the first substantive expansion of the definition since Regulation D's early years. They added the professional-credential and knowledgeable-employee tests, the spousal-equivalent concept, the catch-all (a)(9) investments test, and the family office and family client categories, and they extended entity status to state-registered and exempt reporting advisers and to Rural Business Investment Companies.

The dollar thresholds did not change. The $1,000,000 net worth and $200,000 income tests date to Regulation D's adoption in 1982, with the $300,000 joint-income test added in 1988, and none of them is indexed to inflation. The Dodd-Frank Act's Section 413 removed the primary residence from the net worth calculation and requires the SEC to review the definition periodically, but no review has yet altered the thresholds. Issuers planning a multi-year raise typically monitor this, because a threshold change would alter the size of the eligible audience mid-program.

Why Accredited Status Matters Under Each Exemption

The 506(b) and 506(c) distinction is where accredited status carries the most weight. The trade-off between the two — and why general solicitation drives the verification burden — is covered in our comparison of Rule 506(b) and 506(c) solicitation rules. For the Reg-CF limits that apply to everyone else, see how much each investor can put into a Reg-CF offering.

How Issuers Typically Confirm Status in a 506(c) Raise

Rule 506(c)(2)(ii) lists non-exclusive safe-harbor methods for natural persons. An issuer may use any of them, or another method that constitutes reasonable steps, provided it does not know the purchaser is not accredited.

1. Income review. Review IRS forms reporting income for the two most recent years — W-2, 1099, Schedule K-1 or Form 1040 — plus a written representation that the investor expects to reach the threshold this year.
2. Net worth review. Review asset documentation such as bank or brokerage statements dated within the prior three months, obtain a consumer report from a nationwide credit reporting agency for liabilities, and collect a written representation that all liabilities have been disclosed.
3. Third-party confirmation. Obtain written confirmation, dated within the prior three months, from a registered broker-dealer, SEC-registered investment adviser, licensed attorney or CPA that it has verified the investor's status.
4. Re-verification by representation. For an investor the issuer previously verified, a written representation at the time of sale satisfies the obligation for five years from the prior verification, absent contrary information.

Separately, SEC staff issued a no-action letter in March 2025 indicating that high minimum investment amounts, combined with written representations and the absence of contrary information, can support a reasonable-steps determination. Whether that approach fits a given raise depends on the offering's minimums and investor mix, and is a question for counsel. The operational side — third-party verification providers, timing and drop-off — is covered in our guide to 506(c) verification services.

Common Qualification Errors

• Counting home equity. The single most frequent self-certification mistake among first-time private investors.
• Mixing individual and joint bases. The income test requires the same basis across both prior years and the current-year expectation.
• Relying on an expired or lapsed license. The credential test requires the license to be held in good standing, not merely passed at some point.
• Treating a new SPV as accredited on its assets. A vehicle formed to buy the offered securities fails the (a)(3), (a)(7) and (a)(9) tests and must rely on (a)(8) look-through.
• Assuming knowledgeable-employee status carries over. The (a)(11) category applies only to investments in the employer fund itself, where that fund relies on Section 3(c)(1) or 3(c)(7). For how those fund exclusions work, see our breakdown of 3(c)(1) versus 3(c)(7) funds.

Frequently Asked Questions

Does home equity count toward the $1 million accredited investor net worth test?

No. Rule 501(a)(5) excludes the primary residence as an asset, and mortgage debt on it is excluded as a liability up to the home's fair market value. Debt above that value, and any increase in residence-secured debt in the 60 days before the sale that was not used to buy the home, is counted as a liability.

Can a person become an accredited investor by passing an exam?

Yes. Under Rule 501(a)(10), a natural person holding a Commission-designated professional certification in good standing is accredited regardless of income or net worth. The SEC has designated the Series 7, Series 65 and Series 82 licenses. The license must be active and in good standing at the time of the sale.

Is an LLC or trust an accredited investor?

It can be. An LLC, corporation or partnership qualifies with total assets above $5,000,000 if it was not formed to acquire the securities offered, and a trust qualifies on the same asset test if its purchase is directed by a sophisticated person. Any entity whose equity owners are all accredited investors also qualifies under Rule 501(a)(8).

Do accredited investors have investment limits in Reg-CF or Reg-A+ offerings?

No. Regulation Crowdfunding's per-investor limits in Rule 100(a)(2) apply only to purchasers who are not accredited investors. In an unlisted Tier 2 Regulation A+ offering, the 10% of income or net worth purchase limit likewise does not apply to accredited investors.

Can non-accredited investors invest in a Reg D offering?

Only in a Rule 506(b) offering, which permits up to 35 non-accredited purchasers in any 90-calendar-day period, each of whom must be sophisticated alone or with a purchaser representative. Rule 506(c) permits only accredited purchasers. Selling to non-accredited investors in 506(b) also triggers additional disclosure obligations under Rule 502(b).

Have the accredited investor income and net worth thresholds been adjusted for inflation?

No. The $1,000,000 net worth and $200,000 individual income tests date to Regulation D's adoption in 1982, and the $300,000 joint-income test to 1988. The 2020 amendments added new qualifying categories but left the dollar thresholds unchanged.

Reaching Accredited Investors at Scale

The accredited definition sets the size of the audience a 506(c) issuer can market to, and verification sets the friction between a committed investor and a funded subscription. Both belong in the campaign plan before the first ad runs: targeting that reaches people who plausibly meet a Rule 501(a) test, messaging that explains verification before it becomes a surprise at checkout, and a hand-off to a verification method that fits the investor mix.

Growth Turbine has provided marketing support across more than $490M in aggregate issuer-reported totals, working across 23+ crowdfunding platforms and 25+ industries. For accredited-only raises, start with our Reg-D 506(c) marketing services. To discuss a specific offering, contact our team.

Disclaimer: The information provided in this article is for educational and informational purposes only and does not constitute legal, financial, or investment advice. Always consult with qualified legal counsel and financial advisors before launching a capital raise.