What Is Proof of Income and Why Is It Important?

You’ve worked hard to find your ideal apartment, but now you have to navigate the rental application process. It can be overwhelming, especially for first-time renters. You’ll need several documents to get started, including proof of income.

So what, exactly, is proof of income, and why do you need it? We’ll break it down for you to make the process clear and simple.

What Is Proof of Income?

Proof of income is documentation confirming the amount of money you earn or receive from other sources. This aspect of the apartment application process assures property managers that potential residents can consistently pay rent in full and on time. It also serves as a tool for you to assess and budget effectively so you don’t rent an apartment beyond your means. Proof of income is a standard part of most apartment application processes.

Proof of Income Documents

There are different types of documents you may be asked to produce based on the landlord or management company you’re dealing with. Remember, this isn’t meant to be intrusive. It’s simply intended to make sure you can afford the apartment you want.

Common Proof of Income Documents 

While this isn’t a complete list of the proof of income documents that could be required, these are the most common documents requested during the apartment application process.

Pay Stubs

Regular paychecks or direct deposit statements serve as proof of income. Property managers often require these to verify consistent earnings.

New-Hire Letter

If you’ve just started or are about to start a new job, your offer or new-hire letter serves as income documentation. 

Unemployment Documentation

Individuals receiving unemployment benefits can include these payments as income. Submission of unemployment compensation details will strengthen your application.

Tax Returns

The previous year’s tax return (form 1040) details all your income sources. Tax returns are commonly required for those with diverse income streams. It offers an all-in-one overview for property managers.

Court-Ordered Payments

Contributions like alimony, child support or settlement agreements contribute to income. Court orders detailing payment schedules count as proof.

Pension Statements

If you’re retired, your pension might make up a significant portion of your income. A 1099-R tax form can verify your pension distribution.

Social Security Award Letter

Similarly, if you are retired or receive monthly Social Security payments, your award letter counts as proof of income.

Worker’s Compensation or Disability Insurance Statement

Anyone receiving workers’ compensation can list this as income on a rental application. You’ll need to provide a copy of the documents showing how much you receive and how often you receive it.

Tips for Your Proof of Income Documents

As you collect your documents, make sure you keep extra copies, especially if you need to submit originals. Consider scanning physical documents into digital files. Keep your files organized by type of document and then by date for easy access. 

When it comes to tax returns, make sure you update your files each year. The IRS recommends keeping tax returns for the previous three years.

Careful organization of your documents will speed up the apartment application process and show landlords and managers that you’re capable of handling your rental payments.

Proof of Income for Self-Employed Individuals 

For those who are self-employed and may not have pay stubs or direct deposit statements, proof of income can be a little more complicated—but not impossible.

Self-Employed Income Documentation

Here are three of the most common types of self-employed income documentation you may be asked for.

1099-MISC Tax Form

Independent contractors receiving income from various sources can use the 1099-MISC form to showcase payments received. It consolidates earnings, offering property managers a clear understanding of your income stability.

1040 Tax Form

If you enlist a certified accountant or file taxes online, the previous year’s 1040 offers a comprehensive overview of your income. For online filing, you should be able to access your account and download your most recent tax return.

Business Manifest and License

Self-employed individuals can present a business manifest detailing personal income and a copy of their business license. This combination reinforces income credibility and provides property managers with essential business context.

Tips for Your Self-Employment Proof of Income Documents

As with other proof of income documents, organization is critical. Make sure you keep your business documents separate from your personal records so they don’t get mixed up or lost. Again, tax returns should be updated in your files each year. 

Not only does organization help you keep track of your business documents on an everyday basis, but it’ll help you find what you need quickly upon request.

Obtaining Proof of Income

The process of obtaining proof of income is reasonably straightforward. Here are the steps you need to follow based on document type:

Pay Stubs

Reach out to your employer’s HR department, where you can request physical or digital copies. Many companies now provide online access to pay stubs, ensuring a quick and efficient retrieval process. 

Tax Returns

Additionally, for a comprehensive overview of your income, consider obtaining copies of your filed tax returns. These are often accessible through tax preparation software or your certified accountant.

Employment Status and Income

You can request an official employment verification letter from your employer. This document serves as a formal confirmation of the details needed for applications. 

Bank Statements

Access your bank statements through online banking platforms or by reaching out to your bank directly. This gives landlords or managers a comprehensive overview of all your income sources.

Court-Ordered Payments

Reach out to the clerk of the court where the alimony agreement was filed. You’ll need to provide the case number, names of the parties involved, and the date of the court order. The court clerk can guide you on the process of obtaining copies of relevant documents.

Find Your New Home With Southern Management 

Specific apartment income requirements differ by which management company you choose. At Southern Management, our financial counselors can help you determine your budget and how rent fits into it. We offer conditional leases that work for both you and the apartment community you’ll be renting from. You can still find a place to call home, even with a lack of income, less than perfect credit or an eviction on your record.

To learn more about our application process and lease options, contact us today.