I only received unemployment compensation through the state in 2007. Does that qualify as earned income for an IRA?
"The answer is no," says IRA expert Ed Slott, author of Your Complete Retirement Planning Road Map. Unemployment insurance doesn't count as earned income for IRA eligibility.
It's a good question, though -- so good that Congress didn't consider it when writing the original tax rules, says Slott. But it was ruled on years later in the tax regulations and in a tax court case, which clarified that unemployment compensation doesn't count for IRA eligibility.
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.
Because you can only contribute up to the amount of your earned income, you won't be able to make any IRA contributions for 2007.
There is an exception, however. If you have a spouse who had earned income in 2007, then she can contribute to an IRA on your behalf. She'll need to make the 2007 contribution by April 15, 2008.
For more information about the rules for spousal IRAs, see How a Spousal IRA Works. For more information about IRAs, see Everything You Need to Know About IRAs.
-
Six Missteps to Avoid as You Transition to RetirementDon't lose sight of your finances when you finally reach retirement. These six classic missteps can chip away at the nest egg you’ve worked so hard to build.
-
Why Does One Claim Jack Up My Insurance After Years of No Claims?Even loyal customers can be hit with an insurance premium hike after a claim, despite going many years without any claims. There's a reason for that.
-
Will Retirees Stop Paying Tax on Social Security Next Year?Social Security Lawmakers have proposed to eliminate taxes on Social Security benefits. Here’s what that could mean for you.
-
The 10-Year Rule for Inherited IRAsKiplinger Tax Letter The IRS’ interpretation of the 10-year clean-out rule on inherited IRAs can be complicated.
-
The Downside of Delaying RMDsThanks to the SECURE 2.0 Act, the age for required minimum distributions is going up. However, don't automatically assume you'll benefit from this change.
-
Retirement Saver's Tax Credit Converted to "Saver's Match"President Biden has signed legislation that turns the Saver's Credit into a government match to your retirement plan contributions.
-
How to Get Retirement Income You Can Count On – for LifeSponsored Content from Athene
-
Does an Annuity Belong in a 401(k)?Making Your Money Last Unlike pensions, 401(k)s place the risk of outliving savings squarely on the retiree's shoulders. Find out what's right for you.
-
Income Annuities Take Risk Out of Retirementannuities When used properly, annuities provide invaluable security, so why aren't more people going for them? A study has some insights and recommendations, while Congress tackles legislation to encourage their use.
-
SECURE Act Has Changed the Inherited IRA Rulesinheritance The IRS recently proposed a major change in the way inherited IRAs work for those subject to the SECURE Act’s 10-year rule. Inheritors need to be ready.
