Ask the tax expert – What is earned income?

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What is earned income?

To claim the Earned Income Tax Credit, you need to have earned income.

What is earned income for the EITC?

Does your income count as earned income?

There are two ways to get earned income:

You work for someone who pays you
You own or run a business or farm

What counts as earned income?

  • Income from a job. Wages, salaries, and tips are considered taxable earned income. Commissions and bonuses are also included as earned income.
  • Union strike benefits
  • Long-term disability benefits paid prior to reaching the minimum age of retirement are considered earned income.
  • Self-employed earnings. If you are self-employed, your net earnings are your earned income.
  • Combat pay. For those in the armed forces, combat pay may be counted as earned income.

What doesn’t count as earned income?

In general, any money that comes from investments or sources other than active work are considered “unearned.” These include:

  • Pay received for work while an inmate in a penal institution
  • Interests and dividends received
  • Social security money
  • Pensions
  • Unemployement benefits
  • Alimony
  • Child support

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