by NotMe » Tue Apr 17, 2018 9:52 am
Milo99 wrote:Since the stipend is taxable income - it most certaintly can be used to purchase a Roth IRA. By "earned income" - the IRS means taxable income.
Actually, no. Taxable income is any income which is taxable, earned income is included in this, but so is inheritance, gifts, lottery winnings, etc. Earned income is specifically income which is "earned" in exchange for services rendered, like being an employee. The stipend is not in exchange for services rendered and we are not employees, so while it is taxable income, it is not earned income.
This difference in the definition is to prevent a parent from gifting funds to their dependent so that they can contribute to an IRA.
[quote="Milo99"]Since the stipend is taxable income - it most certaintly can be used to purchase a Roth IRA. By "earned income" - the IRS means taxable income.[/quote]
Actually, no. Taxable income is any income which is taxable, earned income is included in this, but so is inheritance, gifts, lottery winnings, etc. Earned income is specifically income which is "earned" in exchange for services rendered, like being an employee. The stipend is not in exchange for services rendered and we are not employees, so while it is taxable income, it is not earned income.
This difference in the definition is to prevent a parent from gifting funds to their dependent so that they can contribute to an IRA.