You will need to know the minimum retirement age at your most recent job to determine if your long term disability will be considered earned income or not.
It helps to think of earned income as money you work for, as opposed to passive income like interest, dividends, or rental income if you're not in the business of renting out properties.
The IRS defines earned income as:
- Taxable income you earned as an employee, such as wages, salaries, commissions, and tips
- Profits from operating your business or farm
- Long-term disability pay, if received before the minimum retirement age
- Union strike benefits
The IRS also gives you the option of treating nontaxable combat pay (code Q in box 12 of your W-2) as earned income for the Earned Income Credit (EIC).
Worker's comp, unemployment, and pensions don't count as earned income.
IRS definition of earned income
Taxability of social security compensation is determined by your filing status and the other income and total income earned along with it on your return.
For 2021, 2020 and 2019, the total contributions you make each year to all of your traditional IRAs and Roth IRAs can't be more than:
- $6,000 ($7,000 if you're age 50 or older), or
- If less, your taxable compensation for the year
For additional information regarding the Roth IRA contribution, please refer to the following:
Contribution limits for Roth IRAs
[Edited 03/31/2021|12:04 pm PST]
