What types of income qualify as earned income for purposes of making regular contributions to a Traditional or Roth IRA?
regular contribution to an IRA. IRS Revenue Procedure (Rev. Proc.) 91-18 outlines a so-called “safe harbor” rule for determining whether income is considered qualifying earned income for purposes of making a Traditional IRA contribution. Rev. Proc. 91-18 stipulates that any amount shown in the “Wages, tips, other compensation” box on the Form W-2, Wage and Tax Statement, minus any amount shown in the “nonqualified plans” box will be considered eligible compensation for Traditional IRA contributions regardless of whether it constitutes true earned income. In addition, IRS Publication 590, Individual Retirement Arrangements (IRAs), states that taxable alimony and separate maintenance payments received under a decree of divorce or separate maintenance are considered eligible compensation for funding a Traditional or Roth IRA.
