Earned Income and Roth IRA Contributions

November 18th, 2007  |  Published in Roth IRA  |  4 Comments

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.

  

Responses

  1. » Weekly Roundup: I Got An American Express Centurion Card on Blueprint for Financial Prosperity says:

    November 25th, 2007 at 12:00 am (#)

    […] need earned income to contribute to a Roth IRA, so what counts as earned income? Click through to find […]

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    November 26th, 2007 at 2:15 pm (#)

    […] retirehappy from My Retirement Blog presents Earned Income and Roth IRA Contributions. […]

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    May 29th, 2008 at 8:09 am (#)

    […] is earned income? Basically, if they get a W-2 or report income on a Schedule C, then they qualify. Tags: Roth IRA […]

  4. Jewell Jackson says:

    May 9th, 2013 at 11:11 am (#)

    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.