FERS disability income


Q. I have a FERS disability annuity (I have not reached my minimum retirement age). It is taxed as ordinary income, but is it considered as earned income for purposes of contributing to an IRA?

A. From IRS.gov:

Taxable earned income includes:

  • Wages, salaries, tips, and other taxable employee pay.
  • Union strike benefits.
  • Long-term disability benefits received prior to minimum retirement age.
  • Net earnings from self-employment if:
    • You own or operate a business or a farm or
    • You are a minister or member of a religious order;
    • You are a statutory employee and have income.

Examples of Income that are not earned income:

  • Pay received for work while an inmate in a penal institution.
  • Interest and dividends.
  • Retirement income.
  • Social Security.
  • Unemployment benefits.
  • Alimony.
  • Child support.

About Author

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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