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Does income from vested “Restricted Stock Units” qualify as earned income and thus allow me to contribute to a Roth IRA?

Forum|Forum|6 years ago
June 1, 2019
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I am retired but I still get vested “restricted stock units” every year. When they vest, the company withholds payroll taxes and I get a W-2. Would this qualify as earned compensation and allow me to contribute to a Roth IRA? My other earnings are from dividends, interest and capital gains which would do not qualify as earned income.

When I read IRS Bulletin 590-A, it says anything on a W-2, box 1 is earned income and then later says that deferred compensation is excluded from the definition of earned income. I can not find the IRS definition of deferred compensation as used in Bulletin 590-A.

Best answer by TomYoung

Yes, the vesting creates earned income in the year that it's reported on a W2. RSU's are not deferred income, they are employer stock incentive programs and, depending on circumstances, may not have vested meaning you'd have never received the compensation.

Tom Young

T

TomYoungAnswer

Yes, the vesting creates earned income in the year that it's reported on a W2. RSU's are not deferred income, they are employer stock incentive programs and, depending on circumstances, may not have vested meaning you'd have never received the compensation.

Tom Young

D

dmertz

Page 6 of 2015 IRS Pub 590-A indicates that the amount on a W-2 that the IRS considers to be eligible compensation to support an IRA contribution is the amount in box 1 reduced by the amount in box 11.