Tax Category Tax: calculations, VAT, self-employment tips and more

How to calculate earned income

Earned income is the amount of money that you brought in during the year from hands-on work you've done at a job or your own business. It does not include income from certain government benefits or interest from an investment. Use your total earned income for the year to determine your earned income credit (if any) at tax time.

Start by listing your basic salary from all of your jobs. If you work on an hourly basis, multiply your hourly rate by the total number of hours you worked each week to determine your base salary.

Include any pay you received from a union while on strike with your company if applicable.

Add any tips that you received during the year. This is common for waitstaff and service professionals. For instance, if you're a dustman who received tips from homeowners on your route around the holidays include this amount in your earned income.

List the total amount of bonuses you've received during the course of the year from your job, such as a Christmas or performance bonus.

Include disability benefits you received prior to retirement age. You can also add combat pay if you wish, even if it's non-taxable.

Count the net amount of money you earned from your activities as a self-employed individual if you don't work for another company. If you run---meaning actively participate in---a small sole proprietorship, general partnership, one-member LLC (Limited Liability Company), or multi-member LLC business, include your net profit, which is income less expenses. (See "References" below for more information on what business profit counts as earned income.)

Add up all of these items to determine your total earned income.

Things Needed

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