What Is Earned Income?

Earned income is money you receive from working — including wages, salaries, tips, and self-employment income. It's different from passive income like dividends or rent. Earned income is subject to both income tax and payroll taxes (Social Security and Medicare). Having earned income is required to contribute to an IRA and to qualify for the Earned Income Tax Credit. The more earned income you have, the more you can save in tax-advantaged retirement accounts.