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Why is pension income taxable but not eligible for the EIC?

Usually, to have earned income you must have received the funds in exchange for labor, like wages and self-employment income. A pension is a payment for past services performed by the employee. So, it isn’t considered earned income.

You should report the income on your W-2 instead of Form 1099-R if both of these apply:

  • You’re receiving benefits under an employer plan after you retire on disability.
  • You haven’t reached the plan’s retirement age.

Minimum retirement age is the earliest age you could’ve received a pension or annuity if you didn’t have the disability. In this case, you might be eligible for the Earned Income Credit (EIC).

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