My granddaughter earned $3900 on a W2 but $16000 as unemployment money. The program says she can only contribute $3900 to her IRA. Does the unemployment money not count as income?
No because it is not "earned" income.
No, the unemployment benefits are not eligible for an IRA contribution. Only "earned income" can be contributed to an IRA. She can't use it to contribute to an IRA, but she didn't have to pay employment taxes (social security and Medicare) on it either, because it wasn't earned income.
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