Earned income

Written by Fmi.Online Sunday August 29, 2021
Earned income represents the taxable income earned from paid employment, business ownership, or from disability payments. In essence, this is payment for labor or services rendered.

Explanation :

In general, earned income includes wages, salaries, and/or tips, union strike benefits, long-term disability benefits received prior to retirement age, and net earnings from employment as a business owner or a statutory employee. On the contrary, earned income does not include dividends from investment, interest earned on a bank account, social security, retirement income, unemployment benefits and child support/alimony. Eligible beneficiaries can choose if they want their non taxable earned income to appear on their Wage and Tax Statement W-2 Form, depending on whether including the earned income increases or decreases their Earned Income Tax Credit (EITC).

In a nutshell :

  • Earned income is any income received from a job or self-employment.
  • Earned income may include wages, salary, tips, bonuses, and commissions.
  • Income derived from investments and government benefit programs would not be considered earned income.
  • Earned income is often taxed differently from unearned income.
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