Royalties is money from property, but not money that you work for so would not be compensation for an IRA.
Per the IRS
What Is Compensation?
Generally, compensation is what you earn from working.
For a summary of what compensation does and doesn’t
include, see Table 1-1. Compensation includes all of the
items discussed next (even if you have more than one
type).
Wages, salaries, etc. Wages, salaries, tips, professional
fees, bonuses, and other amounts you receive for providing
personal services are compensation. The IRS treats
as compensation any amount properly shown in box 1
(Wages, tips, other compensation) of Form W-2, Wage
and Tax Statement, provided that amount is reduced by
any amount properly shown in box 11 (Nonqualified
plans). Scholarship and fellowship payments are compensation
for IRA purposes only if shown in box 1 of Form
W-2.
What Isn’t Compensation?
Compensation doesn’t include any of the following items.
• Earnings and profits from property, such as rental income,
interest income, and dividend income.
• Pension or annuity income.
• Deferred compensation received (compensation payments
postponed from a past year).
• Income from a partnership for which you don’t provide
services that are a material income-producing factor.
• Conservation Reserve Program (CRP) payments reported
on Schedule SE (Form 1040), line 1b.
• Any amounts (other than combat pay) you exclude
from income, such as foreign earned income and
housing costs.
**Disclaimer: This post is for discussion purposes only and is NOT tax advice. The author takes no responsibility for the accuracy of any information in this post.**
