Does income from RSU count as earned income for IRA contribution?

Forum|Forum|2 years ago
March 28, 2024
1 reply
0 views

I retired in 2022 and had restricted stock units that were awarded to me previously but had not fully vested, and they continued to vest for the next 3 years. For 2023 I had income from the RSU shares that were distributed along with income from ESPP shares that I sold, which were reported on a W-2 in box 1 as wages and compensation. Can I contribute to an IRA based on that as earned income? I read some opinions that the answer is yes, while others say it is deferred compensation so it doesn't count as earned income for IRA contributions.

Not A Product Question

AmyC

Employee

Maybe. ROTH yes. Traditional looks like a no.

The IRS says in ROTH contributions: You can contribute to a Roth IRA if you have taxable compensation and your modified adjusted gross income is within certain limitations

The IRS says in Traditional contributions: To contribute to a traditional IRA, you, and/or your spouse if you file a joint return, must have taxable compensation, such as wages, salaries, commissions, tips, bonuses, or net income from self-employment. Compensation for purposes of contributing to an IRA doesn't include earnings and profits from property, such as rental income, interest and dividend income, or any amount received as pension or annuity income, or as deferred compensation

**Say "Thanks" by clicking the thumb icon in a post**Mark the post that answers your question by clicking on "Mark as Best Answer"

emmel650Author

So are you saying that both the RSU income and the ordinary income from selling ESPP shares are considered to be deferred compensation? They don't fall under the other categories of income that aren't considered to be "compensation" for contribution to an IRA.