Earned income is the total taxable wages and income you receive from working. In some cases, earned income also includes disability payments.
The following are considered Earned Income:
- Wages, salaries, tips, commissions, bonuses, and any other taxable employee pay
- Long-term disability benefits if they are received before the minimum retirement age
- Net income from self-employment if you own/operate a business
- Net income from self-employment if you own/operate a farm
- Net income from self-employment if you are a member of the clergy
- Net income from self-employment as a statutory employee
The following are examples of income that are NOT considered Earned Income:
- Interest and Dividends
- Social Security Benefits
- Child Support
- Retirement income such as pensions and IRAs.
The distinction between Earned Income and Passive Income is important as there a varying tax implications for each.
For information on the Earned Income Credit, click here.