Does Rental Income Count for IRA Contributions?
Rental income is considered "passive," and traditional and Roth IRA contributions must come from "active" income, or compensation from working.

Question: I'm a retired real estate agent, and I manage rental properties. Does my rental income count as having a job for the purpose of contributing to an IRA?
Answer: No, earnings and profits from property don't count. Contributions to traditional and Roth IRAs must come from “active” income--that is, compensation from working. It can include wages, salaries, tips, professional fees, bonuses and other amounts you receive for providing personal services, as well as commissions and self-employment income. If you work for salary or wages, you'll receive an IRS Form W-2 for qualifying income, or if you're an independent contractor or are self-employed, you'll receive a Form 1099 MISC. Another way to know that your income qualifies is if you pay FICA or self-employment tax on it.
Earnings and profits from property, such as rental income, doesn't count as compensation. Rental income is considered passive income—that is, "money made on money," says Ed Slott, a CPA and IRA expert (www.irahelp.com). Interest and dividends are also forms of passive income.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Slott suggests a couple of workarounds: You could form your own property-management company as a corporation or limited-liability company and become its employee. Then you could have a solo 401(k) (see www.irs.gov/retirement-plans/one-participant-401k-plans). Or, if you file a joint return with your spouse and your spouse has earned income, you could each contribute to your own IRAs --as long as your spouse earns enough income to cover each of your contributions. In that case, you can use your rental income to fund your spousal IRA.
For 2019, your total contributions to your traditional and Roth IRAs can't exceed $6,000 ($7,000 if you're age 50 or older) or your taxable compensation for the year, if your compensation was less than that dollar limit. If you and your spouse are funding a regular and spousal IRA, the combined contributions can't exceed the taxable compensation that you report on your joint return. Note that your Roth IRA contribution might be limited based on your filing status and income (see www.irs.gov/forms-pubs/about-publication-590-a).
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
-
Why Losing Your Job Could Be the Best Opportunity to Plan Your Future
Amid this uncertainty lies an opportunity for strategic reassessment and personal growth.
By Mario Hernandez Published
-
Can a New Manager Cure Vanguard Health Care Fund?
Vanguard Health Care Fund has assets of $40.5 billion but has been ailing in recent years. With a new manager in charge, what's the prognosis?
By Nellie S. Huang Published
-
U.S. Treasury to Eliminate Paper Checks: What It Means for Tax Refunds, Social Security
Treasury President Trump signed an executive order forcing the federal government to phase out paper check disbursements by the fall.
By Gabriella Cruz-Martínez Published
-
Trump’s Latest Pitch: No Taxes If You Earn Less Than $150K?
Taxes The Trump administration reportedly wants to eliminate taxes for certain earners.
By Gabriella Cruz-Martínez Last updated
-
Two Consequential Tax Cases You May Not Have Heard About
The Supreme Court's decisions in these cases create uncertainty about challenging IRS regulations and guidance. Expect more litigation to follow.
By John M. Goralka Published
-
Roth IRA Contribution Limits for 2025
Roth IRAs Roth IRA contribution limits have gone up. Here's what you need to know.
By Jackie Stewart Last updated
-
You May Have to Put Catch-Up Contributions in a Roth 401(k): That's Not a Bad Idea
Roth 401(k) High earners will be required to put their catch-up contributions in a Roth 401(k).
By Sandra Block Published
-
Don't Overlook Tax on Crypto Staking Rewards: Kiplinger Tax Letter
Tax Letter The IRS has issued guidance on crypto staking rewards, but broker reporting on digital asset sales won't start until 2025.
By Joy Taylor Published
-
Bond Basics: Zero-Coupon Bonds
investing These investments are attractive only to a select few. Find out if they're right for you.
By Donna LeValley Published
-
The 10-Year Rule for Inherited IRAs
Kiplinger Tax Letter The IRS’ interpretation of the 10-year clean-out rule on inherited IRAs can be complicated.
By Joy Taylor Last updated