An accredited investor is a person or entity the SEC permits to buy unregistered securities, qualified in the United States by income of $200,000 a year, net worth above $1 million excluding a primary residence, or certain professional licenses.
In plain terms
Most investments sold privately — venture funds, hedge funds, private equity, startup rounds, private real estate deals — are never registered with the SEC and cannot legally be offered to the general public. Accredited investor status is the gate. The logic is that people above these thresholds can either evaluate the risk themselves, hire someone who can, or absorb a total loss. Crossing the line does not make anyone a better investor; it removes a legal barrier.
How it works
The definition sits in Regulation D under the Securities Act of 1933. An individual qualifies by meeting any one of these:
- Income: more than $200,000 in each of the two most recent years, or $300,000 jointly with a spouse or spousal equivalent, with a reasonable expectation of the same in the current year.
- Net worth: more than $1 million, alone or jointly, excluding the value of a primary residence. Debt secured by that residence above its value counts against you.
- Professional credential: since 2020, holding a Series 7, Series 65, or Series 82 license in good standing qualifies a person regardless of wealth. Knowledgeable employees of a private fund qualify for that fund.
Entities qualify by other routes, most commonly holding more than $5 million in assets.
Verification is the issuer’s problem, not the investor’s. For a Rule 506(c) offering — one that is publicly advertised — the issuer must take reasonable steps to verify status, which is why funds ask for tax returns, brokerage statements, or a letter from an accountant or attorney.
The numbers
- Income test: $200,000 individual / $300,000 joint, for two consecutive years.
- Net worth test: over $1 million, excluding primary residence.
- Entity test: generally over $5 million in assets.
- Year the dollar thresholds were set: 1982. They have never been indexed for inflation, and remain unchanged as of 2026.
- What $1 million in 1982 would be today: roughly $3.4 million, which is the entire substance of the reform argument.
- The tier above: qualified purchaser, at $5 million in investments, which is the real gate to most large private funds.
- Pending change: the INVEST Act, passed by the House in December 2025 and now before the Senate, would add experience- and exam-based pathways and index the thresholds to inflation.
What people get wrong
That accreditation is the actual barrier to institutional-quality private funds. It is not — it is the first barrier, and the least binding. Above it sits the $5 million qualified purchaser threshold, and above that sit the practical gates that no rule mentions: fund minimums that commonly start at $250,000 to $1 million, closed funds that accept no new investors, and the plain fact that top-quartile managers allocate capacity to existing relationships. A newly accredited investor gains access mostly to the offerings that need to advertise, which is close to an inverse quality filter.
The second misconception is that the thresholds are high. Because they have not moved since 1982, an ordinary retirement account and home equity now clear the net worth test for a large and growing share of American households — which is precisely why the definition is contested from both directions.
Related
Read more: Alternative Assets: Investing Beyond Stocks and Bonds · Venture Capital: The Culture of Tech Money · Hedge Funds and Private Equity
See also: Qualified purchaser · HNWI and UHNWI · Capital call