How to Write a Proof of Income Letter

Proof of income is an important indicator for lenders, homeowners, and many other organizations. After all, your income is a factor that affects various parts of your life, from how much you can get from your health plan to how much you can take out on a personal loan.

In this article, we’ll talk about proof of income and everything that you have to know about this important piece of document.

What Is Proof of Income Letter?

A proof of income letter is a document or set of documents requested by someone, typically a lender or a landlord, in order to determine your ability to pay.

Although not all institutions require this document, it can be very important when it comes to entering financial obligations, like taking out a mortgage, buying a car on a loan, or even renting a place.

You can write your own proof of income letter if you want, as long as the details are confirmed by your employer, accountant, or even social worker, depending on your circumstances.

Along with proof of income, lenders or landlords may request other documents as supporting documents. They may also request a series of documents instead of just a letter.

What Constitutes as Proof of Income?

The letter usually includes a summary of your employment details and your total net income. Take note: net, and not gross income. Net income refers to your take-home pay.

This figure can include your average weekly wage, your annual or hourly wage, and how you expect your earnings to remain stable in the future – for instance, if your salary has consistently increased in the past and is still expected to increase in the near future.

Some documents are considered more authoritative than others, depending on the lender. One lender may be fine just seeing pay stubs, for example, while another lender may also need last year’s federal tax return.

Common Proof of Income Documents

Below is a list of documents that can prove one’s income. This is in no way an intensive list, but it can give you an idea of what documents you can use.

Employment Documents

Documents from your place of work or employment can easily prove that you’re earning how much you say you’re earning. You can ask your employer or manager to provide these documents for you.

• Paychecks. You can submit your most recent paycheck to accurately represent your income. For most lenders, this should be enough.
• Income proof letter. A signed or stamped letter can serve as proof of income. It can also be very easy to get, depending on your relationship with your employer.

Tax Documents

Since tax documents are considered legal documents, they’re typically considered the most reliable proof of income.

• Last year’s tax return (1040). This is a complete document that summarizes all your sources of income. Keep a copy of this form handy for proof of income and other similar situations.
• Payroll and Tax Return (W2). You must provide a W2 from all employers to provide accurate information about your income. If a copy is not available, you can request this document from your employer. 

However, these documents can be difficult to obtain after the tax season is over unless you’re extremely diligent about keeping a copy.

In addition to this, they’re not as accurate as paychecks or payroll receipts since taxes are only filed once a year. If you received an increase or additional income after the last tax season, it won’t be reflected here. This can a problem if a lender or a landlord is requiring a minimum income that your last tax document cannot support.

In that case, you may still need to provide supporting documents like bank statements.

Unearned Income 

Several documents in this category are actually government-issued. This makes them reliable for lenders, but you shouldn’t always rely on these documents as proof.

Why is that? Well, they’re not always consistent or stable sources of income. For instance, although unemployment benefits and workers’ compensation may be accepted by some landlords, many lenders won’t because these payments will eventually stop after some time.

In short, these documents can be helpful if you just need to prove that you’re receiving income in the short term, not in the long term.

• Letter confirming social security income. This statement can be printed online at the official website of the Social Security Administration. Read the Social Security Administration Handbook to find out how you or your loved one can get a Confirmation of Benefits. 
• Annuity report. An annuity is a contract between you and an insurance company. You can ask your insurance agent for an annuity statement.
• Court Ordered Agreement. Contracts such as child support and alimony fall into this category. You may ask for a copy from the court.
• Unemployment Benefits. These benefits provide temporary financial assistance to eligible unemployed people. These requirements are set by the state. You may ask for a copy by contacting your state employment office directly.
• Employee Compensation letter. Workers’ compensation includes on-site assistance to the injured, including compensation for wage changes, and medical treatment. You can get it from your insurance company or the court.

Proof of Income for Self Employed Individuals

Proof of self-employed income may require a little extra effort if you’re not organizing your documents. Take a look at the documents below to see what self-employed people can use to prove their income.

• Self-employed wages and tax returns (1099). These forms prove wages and taxes as a self-employed person. As a legal document, this is one of the most reliable proofs of income you can provide.
• Income statement or ledger document. This summary of your expenses and income can provide proof of your income. By showing your net income, you’re letting lenders know how much you have left after your operating expenses.
• Bank statement. If your deposit history is stable, you can also show your bank statement. It’s a good idea to keep a separate account for your business so you don’t confuse transactions with personal expenses.

Proof of Income for Apartment Dwellers

Landlords usually ask for proof of income to confirm their ability to pay. At a minimum, you should use documents that prove that you have a stable income for the duration of your move-in. 

For example, a combination of payslips and bank statements may be sufficient. Here are some documents that your landlord may ask you to provide proof of income:

• Payment slip. As mentioned earlier, this could be the most accurate snapshot of your wages.
• Proof of income letter. This can be especially useful since it can give your landlord additional insights into your career.
• Previous year’s (1040) tax return. This comprehensive document can give you a complete picture of your income last year. All sources of income are recorded in one document, making the landlord’s job easier.

Proof of Income Letter Template

Need a proof of income letter template? Here’s one way you can do this:

[Employer’s Name] 

[Employer’s Address] 

[City, state, zip code]

Subject: [Your Name] Employment Confirmation 

Dear [Landlord’s Name],

I am writing to you regarding [Your Full Name], an employee of [Name of Company/Place of Work] since [Month and Year Employment Started]. [Your Name] currently holds the title of [Your Job Title/Position].

[Your Full Name] works on a [Full-Time/Part-Time] basis and works [Number of Hours per Time Period]. [Your Full Name] earns $[Insert Amount] on an [Weekly/Bi-Weekly/Monthly/Quarterly/Annual] basis.

If you have any inquiries or need more information, do not hesitate to contact me at [Employer’s Phone Number and/or Employer’s Email Address].

Regards,

[Employer’s Signature]

[Printed Employer Name]

[Employer Position]

[Date] 

Proof of Income Letter: Wrap-Up

Your income is one of the main indicators of financial health. This amount, in addition to your credit score and debt-to-income ratio, is essential when determining your financial position. By preparing a proof of income letter, you can prove your income to whoever needs it.

These can also help in cases where you are trying to get a loan with a job offer letter or after you started a new job. Since you may not be able to demonstrate consistent income for previous months before your new job, a proof of income letter can help the lender understand your ability to repay the loan.

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Frank Gogol

I’m a firm believer that information is the key to financial freedom. On the Stilt Blog, I write about the complex topics — like finance, immigration, and technology — to help immigrants make the most of their lives in the U.S. Our content and brand have been featured in Forbes, TechCrunch, VentureBeat, and more.

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