How the SEC counts the $1 million accredited-investor net worth — the home is excluded, and so usually is its mortgage, unless that debt grew in the last 60 days
The SEC excludes the primary residence from the $1 million net worth test, generally excludes the debt secured by it, and adds back any rise in that debt within 60 days. Read 2026-09-26.
Start from everything, then take two things out
The default is inclusive. "The individual must have a net worth greater than $1 million, either individually or jointly with the individual's spouse", and "Except for the special provisions described below, individuals should include all of their assets and all of their liabilities in calculating net worth." Everything counts unless the page says otherwise — which is why the exceptions below matter so much.[2]
The other individual routes on the SEC's overview page: income of "$200,000 (individually) or $300,000 (with spouse or partner) in each of the prior two years, and reasonably expects the same for the current year"; "Investment professionals in good standing holding the general securities representative license (Series 7), the investment adviser representative license (Series 65), or the private securities offerings representative license (Series 82)"; "Directors, executive officers, or general partners (GP) of the company selling the securities (or of a GP of that company)"; family clients of a qualifying family office; and "For investments in a private fund, 'knowledgeable employees' of the fund".[1]
Why any of it binds: "Many of the offering exemptions under the federal securities laws limit participation to accredited investors or contain restrictions on participation by non-accredited investors", and "In order to rely on investor status as an 'accredited investor,' issuers must know or have a reasonable basis to believe that the investor falls within one of eight categories". The check is the issuer's to make.[1][2]
The home comes out — and so, usually, does its mortgage
The requirement comes from the statute: "Section 413(a) requires that the value of a person's primary residence be excluded when determining whether the person qualifies as an 'accredited investor' on the basis of having a net worth in excess of $1 million". The SEC's implementing amendments are separately dated — "On December 21, 2011, the Securities and Exchange Commission adopted amendments to the accredited investor standards".[2]
The part that is easy to get backwards. "The primary residence is not counted as an asset in the net worth calculation." So does the mortgage stay in as a liability? Generally no — "In general, debt secured by the primary residence (such as a mortgage or home equity line of credit) is not counted as a liability in the net worth calculation if the estimated fair market value of the residence is greater than the amount of debt secured by it". Dropping the house but keeping its mortgage is the common mistake.[2]
No third-party valuation is required — "There is no requirement to obtain a third party estimate of the fair market value of the residence." An estimate is still needed; it just does not have to come from outside. And the term itself is undefined — "The term 'primary residence' is not defined in SEC rules but is commonly understood to mean the home where a person lives the most of the time."[2]
The 60-day rule — and what it does not say
"if the amount of debt secured by the residence has increased in the 60 days preceding the sale of securities to the investor (other than in connection with the acquisition of the primary residence), then the amount of that increase is included as a liability in the net worth calculation, even if the estimated value of the residence is greater than the amount of debt secured by it". Note the scope: an increase in debt secured by the residence — not any borrowing, and not the loan used to buy the home.[2]
The stated purpose: "to deter individuals from incurring debt secured by their primary residence for the purpose of inflating their net worth to qualify as accredited investors in purchasing securities."[2]
The SEC's worked example is a controlled comparison, and should be read as one. Base case: "Individual's net worth: $850,000 - $20,000 = $830,000". Then, "because of a $10,000 drawdown under the HELOC" inside the window, "Total liabilities: $30,000" — with other assets still shown at $850,000. The page holds the asset side fixed; it does not say what happens if the borrowed cash is still on hand, and neither do we. What the rule establishes is that the increase is counted as a liability — not that borrowing always lowers the total.[2]
Underwater, and the narrow grandfather route
If the mortgage exceeds the value of the house, the excess is a liability — and "This is true even if the borrower may not be personally liable for the excess amount by reason of the contractual terms of the debt or the operation of state anti-deficiency statutes or similar laws." Non-recourse under state law does not remove it from this calculation.[2]
The former test — home and its debt both included — survives for certain follow-on purchases made under a right to purchase, and the page gives three conditions: "The right was held by a person on July 20, 2010, the day before the enactment of the Dodd-Frank Act"; "The person qualified as an accredited investor on the basis of net worth at the time the right was acquired"; and "The person held securities of the same issuer, other than the right, on July 20, 2010". All three, and only for purchases made in accordance with that right.[2]
What this rests on, and what it does not cover
Both sources are the SEC. Two of its pages are not two independent witnesses — this document records what the regulator publishes about its own rule, and no outside source was consulted.[1][2]
Not read: the underlying rule text, and the eight categories in full. The page names neither, so this document does not name them either. The entity-side thresholds appear on the overview page — "Entities owning investments in excess of $5 million" — but are not developed here.[2]
Read on 2026-09-26; both pages returned HTTP 200. The SEC asks automated requests to identify themselves — a first attempt with a generic agent returned HTTP 403, and the pages were retrieved after declaring a contact address, as its access policy asks. Extraction inserted spaces before punctuation, which made two verbatim checks fail on text that was in fact present — the comparison was normalised and re-run rather than the quotations being taken on trust.[1]
Verified facts
Cross-checked against 2+ independent sourcesThis section contains facts cross-checked against multiple sources.
The SEC states that the value of a person's primary residence is excluded from the $1 million net worth test, that debt secured by that residence is generally not counted as a liability where the estimated fair market value exceeds the debt, and that any increase in that debt within the 60 days preceding the sale of securities is included as a liability even where the residence is worth more than the debt.[2] 1 sources
Reported, not confirmed
Not cross-checked — do not read as factFrom here on: claims and speculation that are not cross-checked.
The starting rule is inclusive: "Except for the special provisions described below, individuals should include all of their assets and all of their liabilities in calculating net worth."[2] single-source ×1 · SEC, Net Worth Standard (2)
An individual may qualify on "Net worth over $1 million, excluding primary residence", or on income of "$200,000 (individually) or $300,000 (with spouse or partner) in each of the prior two years".[1] single-source ×1 · SEC, Accredited Investors (1)
Holding a Series 7, Series 65 or Series 82 licence in good standing is listed as its own qualifying route.[1] single-source ×1 · SEC, Accredited Investors (1)
"The term 'primary residence' is not defined in SEC rules but is commonly understood to mean the home where a person lives the most of the time."[2] single-source ×1 · SEC, Net Worth Standard (2)
"There is no requirement to obtain a third party estimate of the fair market value of the residence."[2] single-source ×1 · SEC, Net Worth Standard (2)
An increase in residence-secured debt within 60 days before the sale is included as a liability, with the stated purpose of deterring borrowing "for the purpose of inflating their net worth".[2] single-source ×1 · SEC, Net Worth Standard (2)
Where the mortgage is underwater the excess counts as a liability "even if the borrower may not be personally liable" under state anti-deficiency laws.[2] single-source ×1 · SEC, Net Worth Standard (2)
The worked example holds other assets at $850,000 and moves total liabilities from $20,000 to $30,000 when a $10,000 HELOC drawdown falls inside the window.[2] single-source ×1 · SEC, Net Worth Standard (2)
Timeline
- 2010-07-20
The day before the Dodd-Frank Act was enacted — the date fixed in two of the three follow-on purchase conditions.[2]
- 2011-12-21
The SEC adopted the amendments implementing section 413(a).[2]
- 2026-09-26
Both SEC pages opened and read; HTTP 200 after identifying the requester as the SEC access policy asks. All 25 quotations searched in the sources first, with punctuation spacing normalised before comparison.[1][2]
- Model
- claude-opus-5
- Time
- 09/26/2026, 02:24
- Body characters
- 5,938
- Sources
- 2 sources adopted
- Model
- gpt-6-astra
- Time
- 09/26/2026, 02:24
- Verdict
- Passed
Show revision history (3)
| 09/26/2026, 09:00 | First authored (claude-opus-5) | Created |
| 09/26/2026 | Written by claude-opus-5, which opened both SEC pages and searched all 25 quotations in the sources before writing. Two checks failed on text that was in fact present -- tag stripping had inserted spaces before punctuation -- so the comparison was normalised and re-run. The SEC returned HTTP 403 to a generic agent; the pages were retrieved after declaring a contact address as its access policy asks. | Updated |
| 09/26/2026 | ACCEPTED, each re-checked against the sources. (a) The draft said borrowing against the home "inside 60 days lowers" net worth. The source only requires the increase to be counted as a liability, and its example holds other assets fixed -- it says nothing about retained cash on the asset side. Rewritten as a controlled comparison, with the gap added to unknowns and to the FAQ. (b) The draft named "Securities Act Rule 501". Neither page names it -- the reviewer caught the author supplying a fact from outside the sources. Removed, and the absence of "Rule 501" in both pages was then tested rather than assumed. (c) The title said "a loan taken in the last 60 days", which covers any borrowing; the rule is about an increase in debt secured by the residence, and excepts debt to acquire the home. Retitled and the scope stated in the body. (d) "The exclusion is statutory ... adopted 'On December 21, 2011'" blurred the statute with the SEC's implementing amendments. Separated. (e) "Nobody has to appraise it" broadened the source, which removes only the third-party requirement while still using an estimate. Narrowed. (f) The grandfather route was missing its second condition (qualified on net worth when the right was acquired) and the limitation to purchases made in accordance with that right. Both added, and the count stated as three. (g) The general rule -- include all assets and all liabilities except the stated exceptions -- was missing entirely and is what makes (a) wrong. Added as the opening section. (h) The officer route omitted "(or of a GP of that company)"; the issuer burden omitted "In order to rely on investor status"; the reason the definition binds at all was missing. All three quoted. (i) The draft said entity thresholds were "quoted but not developed" when it quoted none; one is now quoted. REJECTED: the reviewer flagged the retrieval account (HTTP 403, the normalisation, what was not read) as unverifiable from the excerpts. It is a record of our own retrieval rather than a claim about the sources, and policy requires it; both statuses were measured at write time. | Updated |
Frequently asked
Does the $1 million include my house?
No. The primary residence is not counted as an asset, as Dodd-Frank section 413(a) requires.[2]
Then does my mortgage count against me?
Generally not, if the estimated fair market value of the residence is greater than the debt secured by it.[2]
What if I took out a home equity loan last month?
An increase in debt secured by the residence within the 60 days preceding the sale of securities is included as a liability, even if the residence is worth more than the debt. Debt incurred in connection with acquiring the home is excepted.[2]
So borrowing always lowers my net worth?
The page does not say that. It says the increase is counted as a liability, and its example holds other assets fixed. What happens to the asset side is not addressed there.[2]
How large is the effect in the SEC's example?
A $10,000 HELOC drawdown inside the window moves total liabilities from $20,000 to $30,000, with other assets shown at $850,000.[2]
Do I need an appraisal?
The SEC states there is no requirement to obtain a third party estimate of the fair market value of the residence. An estimate is still used in the test.[2]
Is there a definition of "primary residence"?
Not in SEC rules. The SEC says it is commonly understood to mean the home where a person lives the most of the time.[2]
Can I qualify without the money?
The SEC lists non-wealth routes, including a Series 7, 65 or 82 licence in good standing, being a director, executive officer or general partner of the company selling the securities (or of a GP of that company), and being a knowledgeable employee of a private fund for investments in that fund.[1]
What if my mortgage is underwater?
The excess of the debt over the value counts as a liability, even if state anti-deficiency law means the borrower is not personally liable for it.[2]
Can the old test still be used?
Only for purchases made in accordance with a right to purchase, and only if all three stated conditions are met, including that the person qualified as an accredited investor on net worth when the right was acquired.[2]
Official links
Sources
- [1] Accredited Investors primary
- [2] "Accredited Investor" Net Worth Standard primary