What is earned income?

Earned Income is taxable income or profit you received from working. You may have income from working for an employer and running a business. You must report all income earned during the year on your Federal and State returns. 

Taxable income includes income from earned and unearned income such as Wages, Ordinary dividends, Qualified dividends, Taxable refunds, credits, or offsets of state and local income taxes, Alimony, Business income or (loss), Capital gain or (loss), Other gains or (losses), IRA distributions, Pensions and annuities, Rental real estate, royalties, partnerships, S corporations, trusts, etc., Farm income or (loss), Unemployment compensation, Social Security Benefits, and Other Income.


Common Income Statements 
  • Form W-2 (Wages, Tips, and Salaries)
  • Form 1099-MISC (Self-Employment or Miscellaneous Income)
  • Tax statements (summary)
  • Schedule K-1 Forms 1065 or 1120 (income from a partnership, small business or trust)
  • Form W2-G (Gambling winnings)
  • Form 1099-C (Cancelled Debts)
  • Cash payments etc.

Keep in mind that commissions and bonuses, as well as some scholarships, are also considered taxable. The combination of your earned income and unearned income is your gross income. Read more about unearned income here.

Earned income is an open door for you to get credits such as the common, Earned Income Tax Credit (EITC). You must meet all terms. Your Adjusted Gross Income (AGI) must be less than the set limit for the year. You must have a valid Social Security Number, your filing status cannot be Married Filing Separately, You must be a U.S. citizen or resident alien, you cannot file foreign earned income, your investments must be less than $3,400. You cannot be a qualifying child of another taxpayer. Read more here.

If you have a qualifying child, they must meet the IRS requirements. Your qualifying child cannot be claimed by another. If you do not have a qualifying child, you must be at least 25 years of age and under 65. You must have lived in the U.S. for more than half the year.

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