Earned income is the money an individual receives as a result of their work or actions. This type of income includes wages, salaries, tips, and net earnings from self-employment. Essentially, any income generated from actively working, whether for oneself or as an employee, falls under earned income.
Earned income is relevant in various legal contexts, particularly in tax law and employment law. It affects how individuals report their income on tax returns and determines eligibility for certain tax credits, such as the Earned Income Tax Credit (EITC). Users can manage their tax filings and related forms using resources like US Legal Forms, which provide templates for reporting earned income.
Here are a couple of examples of abatement:
For instance, a person working as a teacher earns a salary, which is considered earned income. Similarly, an individual running a freelance graphic design business generates earnings through their services, also classified as earned income.
Examples of state differences (not exhaustive)
| State | Earned Income Tax Rate |
|---|---|
| California | 1% - 13.3% based on income level |
| Texas | No state income tax |
| New York | 4% - 8.82% based on income level |
This is not a complete list. State laws vary and users should consult local rules for specific guidance.
| Term | Definition | Differences |
|---|---|---|
| Unearned Income | Income not derived from work, such as interest, dividends, or rental income. | Earned income is generated through active work, while unearned income is passive. |
| Gross Income | Total income before deductions, including both earned and unearned income. | Earned income is a subset of gross income, specifically from work-related activities. |
If you earn income through employment or self-employment, ensure you keep accurate records of your earnings. This will help you when filing your taxes. You can explore US Legal Forms for templates that can assist you in preparing your tax documents. If your situation is complex, consider seeking advice from a tax professional.
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Earned income includes wages, salaries, tips, and net earnings from self-employment.