Payroll Dictionary
Earned income
Earned income, which is usually defined with reference to the self-employment income rules, generally means wages, salaries, tips, professional fees, and other amounts received as compensation for personal services rendered. This term is often used to distinguish unearned income, which includes interest and dividends. The term is sometimes more specifically defined, e.g., for purposes of the foreign income exclusion and for determining self-employment income. In addition to foreign income and self-employment income, the term is relevant to determining income tax liability of minors, IRA contributions, and credits for low-income and elderly or permanently disabled taxpayers.