Can a child with a low earned income contribute up to their net or their gross earned income? thanks for your advice!
I answered my own question with the help of my friend Google…It’s based on gross earned income.
I answered my own question with the help of my friend Google…It’s based on gross earned income.
Careful, there. It depends on what kind of income we’re talking about.
For a W-2, it’s going to be gross income as reported in box 1 of the W-2.
But they might also be self employed. In that case, earned income would be the NET income from schedule C or F. This could be important for young people who might deliver food for Door Dash or Uber Eats. They would need to include their expenses for the car (and anything else that’s allowed - such as phone costs) before calculating their earned income for an IRA contribution.
–Peter
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Thanks Peter, in my daughter’s case it is W2 wage income so she can use gross. That said your point is well taken if either of my children take (as is increasingly common) a more self employed style job in the future. Cheers, Thinkingbig