My Retirement Blog

Earned Income and Roth IRA Contributions

You can only contribute to a Roth IRA if you have earned income, so one wonders what counts as earned income? Does Social Security count? What about rental income? How about interest from bank accounts or capital gains from the sale of stock? Actually, none of those count as earned income. Earned income is, in general, that income which you receive as a result of working. Whether that’s reported on a W-2, reported on a Schedule C (where business income is reported), or on a Schedule F (that’s for farming), it has to be earned. In addition to those things that appear on those two schedules and a W-2, union strike benefits, alimony, and long-term disability benefits received prior to minimum retirement age also count as earned income.

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Andy Hough

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4 responses to “Earned Income and Roth IRA Contributions”

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  4. Jewell Jackson

    What about a bonus paid in the current year (so I have a current W2) but earned in the previous year when I was actually working? Does that count as earned income for the current year?

    Thanks.