Your income is generally split into two categories: earned income and income not earned.
The 2 ways you can receive earned income are when someone pays you for your work or service or you operate your own business or farm.
Here’s a general list of what’s considered taxable earned income:
- Federal taxable wages, salaries, tips, and other miscellaneous taxable employee pays
- Union strike benefits
- Long-term disability benefits received before the minimum retirement age (retirement age may vary depending on where you live )
- Net gain from self-employment under these categories:
- You operate or own a business or farm
- You are a minister or member of a religious order
- You’re a statutory employee with income (you can find this on your W-2, Box 13 or this is applicable if you’re working as a contractor)
What is considered unearned income and do I still need to report it?
Unearned income can affect your credits and deductions. Here are some examples of unearned income :
- Interest and dividends
- Capital gains
- Retirement income
- Social security
- Social Security Disability Income (SSDI)
- Unemployment benefits
Please note that this is an incomplete list meant to provide some context or idea of what is or isn’t treated as earned income. Refer to Form 1040 instructions to help you figure out what income you need to report on your tax return.