Can I buy an IRA with imputed income? I am retired and have only one W2 for imputed income. Is it eligible for an IRA purchase?

[ThomasM125]

You need earned income to make a contribution to an individual retirement account. The IRS defines earned income as it is associated with a W-2 reporting as "wages, salaries, tips and other employee pay..." Furthermore, the pay must be taxable. So it would seem the operative question here is if you consider yourself an employee. It would seem you are not, as you mention you are retired. So it is not likely the imputed income would qualify as Earned Income .

[dmertz · Accepted solution]

The IRS considers the amount in box 1 of the W-2 minus any amount in box 11 to be compensation that will support an IRA contribution.

[DaveMR]

Seems like both experts have different opinions. I am retired and have a W2 with imputed income in Boxes 1,3,5 for a life insurance policy paid for by the company I worked for that is taxable for Federal, Social, and Medicare. Can I use that to make an IRA contribution against. Thanks, Dave

[MarilynG1]

No, you generally cannot make an IRA contribution with income that is not considered "earned income," even if it is reported on a W-2. To contribute to a traditional or Roth IRA, you must have taxable compensation—such as wages, salaries, tips, or self-employment income—from active work.  However, if your spouse has earned income, you can contribute using your spouse's earned income.  

Examples of W-2 income that are not earned income include long-term disability payments, pensions, or annuity income. Other non-earned income includes, but is not limited to, interest, dividends, and capital gains.

Here's more detailed info on IRA's from the IRS.

@DaveMR 

[DaveMR]

Thanks Marilyn, It does seem that expert opinion on this differs though - here's a different opinion.................

https://ttlc.intuit.com/community/retirement/discussion/imputed-income-ira-contribution/00/3536144

[dmertz]

From IRS Pub 590-A:

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).