Earned income is money you receive for working, either as an employee or through self‑employment.
It generally includes pay you receive for services you perform.
✅ Examples of Earned Income
These types of income count as earned income:
- Wages and salaries (reported on Form W‑2)
- Tips and commissions
- Bonuses
- Net self‑employment income (reported on Schedule C)
- Union strike benefits
- Certain disability benefits received before retirement age
🚫 Not Earned Income
These types of income do NOT count as earned income:
- Interest and dividends
- Retirement income, such as:
- Pensions
- Social Security received after retirement age
- Unemployment benefits
- Alimony (for divorces finalized after 2018)
- Child support
- Rental income, unless you are actively providing services (for example, operating it like a business)
🧾 Why It Matters
Earned income is used to determine eligibility and limits for:
- Earned Income Tax Credit (EITC)
- Child Tax Credit
- Retirement contributions (such as IRA contribution limits)
- Filing requirements for dependents
🛠️ Example
Scenario:
Christina earns $35,000 from her job and $2,000 in interest from savings.
- Earned income: $35,000
- Unearned income: $2,000
✅ Only the $35,000 counts for:
- EITC eligibility
- IRA contribution limits