Earned vs. ordinary income


Q. What is the difference between earned income and ordinary income?

A. For tax purposes, all income is ordinary income unless it is defined to be something else (capital gains income, for example). Ordinary income is subject to ordinary income tax rates. Earned income is a type of ordinary income that comes to you as the result of work you perform. It may be subject to a different tax rate or set of tax rates.


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Mike Miles is a Certified Financial Planner licensee and principal adviser for Variplan LLC, an independent fiduciary in Vienna, Virginia. Email your financial questions to fedexperts@federaltimes.com and view his blog at money.federaltimes.com.

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