Earned Income
Earned income includes all of the following types of income:
- Wages, salaries, tips, and other taxable employee pay. Employee pay is earned income only if it is taxable. Nontaxable employee pay, such as certain dependent care benefits and adoption benefits, is not earned income. But there is an exception for nontaxable combat pay, which you can choose to include in earned income, as explained below.
- Net earnings from self-employment.
- Gross income received as a statutory employee.
Nontaxable combat pay election. You can elect to include your nontaxable combat pay in earned income for the earned income credit.
Net earnings from self-employment. You may have net earnings from self-employment if:
- You own your business, or
- You are a minister or member of a religious order.
Minister's housing. The rental value of a home or a housing allowance provided to a minister as part of the minister's pay generally is not subject to income tax but is included in net earnings from self-employment.
Statutory employee. You are a statutory employee if you receive a Form W-2 on which the Statutory employee box (box 13) is checked.
Strike benefits. Strike benefits paid by a union to its members are earned income.
Amounts you received for performing ministerial duties as an employee count as earned income. This includes wages, salaries, tips, and other taxable employee compensation. Amounts you received for performing ministerial duties, but not as an employee, do not count as earned income. Examples include fees for performing marriages and honoraria for delivering speeches.
Disability Benefits. If you retired on disability, benefits you receive under your employer's disability retirement plan are considered earned income until you reach minimum retirement age. Minimum retirement age generally is the earliest age at which you could have received a pension or annuity if you were not disabled. Beginning on the day after you reach minimum retirement age, payments you receive are taxable as a pension and are not considered earned income.
This information is found in Publication 596, Earned Income Credit.
FAQs
For the year you are filing, earned income includes all income from employment, but only if it is includable in gross income. Examples of earned income are: wages; salaries; tips; and other taxable employee compensation. Earned income also includes net earnings from self-employment.
What is my earned income amount? ›
Earned income includes all the taxable income and wages you get from working for someone else, yourself or from a business or farm you own.
What disqualifies you from earned income credit? ›
In general, disqualifying income is investment income such as taxable and tax-exempt interest, dividends, child's interest and dividend income reported on the return, child's tax-exempt interest reported on Form 8814, line 1b, net rental and royalty income, net capital gain income, other portfolio income, and net ...
What disqualifies you from earned income credit 2024? ›
If you received more than $11,000 in investment income or income from rentals, royalties, or stock and other asset sales during 2023, you can't qualify for the EIC. This amount increases to $11,600 in 2024. You have to be 25 or older but under 65 to qualify for the EIC.
What is the minimum income for earned income? ›
Basic Qualifying Rules
Have worked and earned income under $63,398. Have investment income below $11,000 in the tax year 2023. Have a valid Social Security number by the due date of your 2023 return (including extensions)
Why am I not eligible for earned income? ›
To qualify for the Earned Income Tax Credit, or EITC, you must: Be at least 25 years old, but not older than 65. If you're claiming jointly without children, only one person needs to meet the age requirement. Have worked and earned at least $1 in income (pensions and unemployment don't count), but no more than $63,398.
How can I get earned income credit without a job? ›
You do not qualify for the Earned Income Credit (EIC) unless you have earned income and meet all the other EIC qualifications. Being unemployed, not working, and/or not meeting the filing threshold automatically disqualifies you from the EIC.
What is other earned income? ›
Generally, this is income not from wages, self-employment, retirement, home or property rentals, or investments; from a tax perspective, this is any income not reported on a W-2 or 1099 form.
Is EIC based on gross or net income? ›
To qualify for the credit, a taxpayer must have earned income, but stay within certain thresholds. A Single filer's adjusted gross income must be less than $17,640 if he or she has no children; $46,560 with one child; $52,918 with two children; and $56,838 with three or more children.
Can a single person claim earned income credit? ›
EITC income limits
For tax year 2024, if you don't claim any children (or relatives) and you're filing as single, head of household, or widowed, the maximum adjusted gross income you can have and still qualify for some EITC funds is $18,591. If you're married filing jointly, the limit is $25,511.
Other Income is money or income generated from activities unrelated to business, work, or performing services. Generally, this is income not from wages, self-employment, retirement, home or property rentals, or investments; from a tax perspective, this is any income not reported on a W-2 or 1099 form.
What are the three forms of earned income? ›
Three of the main types of income are earned, passive and portfolio. Earned income includes wages, salary, tips and commissions. Passive or unearned income could come from rental properties, royalties and limited partnerships. Portfolio or investment income includes interest, dividends and capital gains on investments.
What is considered unearned income? ›
Unearned income includes investment-type income such as taxable interest, ordinary dividends, and capital gain distributions. It also includes unemployment compensation, taxable social security benefits, pensions, annuities, cancellation of debt, and distributions of unearned income from a trust.
What is not counted as income? ›
Nontaxable income won't be taxed, whether or not you enter it on your tax return. The following items are deemed nontaxable by the IRS: Inheritances, gifts and bequests. Cash rebates on items you purchase from a retailer, manufacturer or dealer.
