Does non qualified deferred compensation distribution/payout count toward traditional IRA contribution eligibility?

[kvural]

I get monthly checks from the company I retired from.  They are called non-qualified benefits disbursement - maybe it is deferred compensation payout.  They send me two 2023 W2's for it. I enter these and there is about $40k that shows up as earned income in Turbotax Deluxe desktop 2023.  The Turbotax says I am ineligible for IRA contribution because my earned income is zero - even though there is a $40k value in the earned income line.  It asks me my total traditional IRA amount (??) and then says I have to pay penalty - I cannot get past this step. Is this because it sees my non-qualified disbursement as non-applicable to earned income requirements for IRA contribution?  I also have dividend, soc sec and 1099R income which I know does not count towards IRA eligibility earned income.

[dmertz · Accepted solution]

Income from a nonqualified deferred compensation plan will not support an IRA contribution.  The IRS states that income on a W-2 that will support an IRA contribution is the amount in box 1 minus the amount in box 11.

[kvural]

Thank you, I agree.