Investment Limits
Because of the risks involved with securities-based crowdfunding, you are limited in how much you can invest during any 12-month period in these transactions. If you are a non-accredited investor, the limitation on how much you can invest depends on your net worth and annual income. Following are the investment limits.
If either your annual income or your net worth is less than $124,000, then during any 12-month period, you can invest either $2,500 or 5% of your annual income or net worth, whichever is greater.
If both your annual income and your net worth are equal to or more than $124,000, then during any 12-month period, you can invest up to 10% of annual income or net worth, whichever is greater, but not to exceed $124,000.
The following table provides a few examples:
|
Annual Income |
Net Worth |
Calculation |
12-month Limit |
|
$30,000 |
$40,000 |
greater of $2,500 or 5% of $40,000 ($2,000) |
$2,500 |
|
$150,000 |
$80,000 |
greater of $2,500 or 5% of $150,000 ($7,500) |
$7,500 |
|
$150,000 |
$124,000 |
10% of $150,000 ($15,000) |
$15,000 |
|
$124,000 |
$900,000 |
10% of $900,000 ($90,000) |
$90,000 |
How do I calculate my net worth?
Calculating net worth involves adding up all your assets and subtracting all your liabilities. The resulting sum is your net worth.
For purposes of crowdfunding, the value of your primary residence is not included in your net worth calculation. In addition, any mortgage or other loan on your home does not count as a liability up to the fair market value of your home. If the loan is for more than the fair market value of your home (i.e., if your mortgage is underwater), then the loan amount that is over the fair market value counts as a liability under the net worth test.
Further, any increase in the loan amount in the 60 days prior to your purchase of the securities (even if the loan amount doesn’t exceed the value of the residence) will count as a liability as well. The reason for this is to prevent net worth from being artificially inflated through converting home equity into cash or other assets.
There is no investment limit for accredited investors.
Who is an accredited investor?
An accredited investor, in the context of a natural person, includes anyone who:
- earned income that exceeded $200,000 (or $300,000 together with a spouse or spousal equivalent) in each of the prior two years, and reasonably expects the same for the current year, OR
- has a net worth over $1 million, either alone or together with a spouse or spousal equivalent (excluding the value of the person’s primary residence), OR
- holds in good standing a Series 7, 65 or 82 license.
