Legal Definitions - earned income

Earned Income refers to the money a person receives in exchange for their work. This includes wages, salaries, bonuses, commissions, tips, and other forms of compensation.

According to the Internal Revenue Code, earned income includes:

• Wages and salaries
• Tips
• Other employee compensation
• Net earnings from self-employment

For example, if you work at a restaurant and receive a salary, tips, and a bonus, all of these would be considered earned income.

Additionally, some payments related to retirement compensation or long-term disability benefits may also be considered earned income.

People with low income who meet certain requirements may be eligible for a federal earned income tax credit. This credit can reduce their tax bill and may even result in a refund of previously paid taxes.

Overall, earned income is the money a person earns through their work, and it can come in many different forms.