TN 18 (04-11)

HI 03020.020 What is Earned Income

For purposes of determining Medicare Part D eligibility, the rules for what we consider earned income are the same as the Supplemental Security Income (SSI) program.

A. Types of earned income

Earned income consists of the following types of payments.

1. Wages

Wages are what an individual receives (before any deductions) for working as someone else’s employee. Wages include:

  • salaries,

  • commissions,

  • bonuses,

  • severance pay, and

  • any other special payments received because of employment.

For more on wages, see SI 00820.100.

Wages may also include the value of food and shelter, or other items provided instead of cash. For example, we consider clothing an employer provides to an employee as wages. This is in-kind earned income. However, for domestic workers and certain agricultural workers, we treat in-kind pay as unearned income.

See SI 00820.010 for information on how to treat in-kind payments for domestic and agricultural workers.

See RS 01402.020 for additional information about when we treat in-kind items provided to agricultural workers as unearned income.

2. Net earnings from self-employment

Net earnings from self-employment are gross earnings from a trade or business, minus the allowable deductions for that trade or business. Net earnings also include a self-employed person’s share of profit or loss in any partnership.

Net earnings from self-employment are the same net earnings that we count under the Social Security retirement program and report on the individual’s Federal income tax return.

For more information on net earnings from self-employment, see SI 00820.200.

3. Payments for services in a sheltered workshop

When an individual performs services in a sheltered workshop or work activity center, they receive payment. Their participation in these programs helps them become self-supporting.

For more information on payments for services performed in a sheltered workshop or work activities center, see SI 00820.300.

4. Royalties and honoraria

Earned income is royalties received as part of an individual’s trade or business.

For details on royalties and honoraria, see SI 00820.450.

Royalties considered earned income are payments to the individual in connection with any publication of the individual’s work.

Honoraria payments considered earned income are portions of payments such as

  • an honorary payment,

  • reward, or

  • donations

received in consideration of services rendered by the individual for which the law does not enforce payment.

NOTE: In some cases, royalties may be unearned income. For information on royalties, see SI 00830.510.

B. References

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HI 03020.020 - What is Earned Income - 04/29/2011
Batch run: 07/08/2013