Only Income = EE Savings Bonds: can I contribute to IRA?

[tk2356]

Hi all,

I wasn't able to find a straightforward answer to this, so any help would be greatly appreciated.

I'm a military reservist who puts all of my drill money into my TSP (401k), and the housing stipend I receive is not considered income. I am selling $4k worth of EE savings bonds, though... does that mean that I can contribute to an IRA up to the amount of interest earned from those bonds?

[Watchmaker]

I don't think so. An IRA requires earned income, which the EE bond interest isn't.

[tk2356]

Well that's unfortunate but does make sense! Thank you for the quick response.

[MDM]

In case you get nontaxable combat pay, that is eligible.  See "What is Compensation?" on p. 6 of https://www.irs.gov/pub/irs-pdf/p590a.pdf.

[Nords]

Hi all,

I wasn't able to find a straightforward answer to this, so any help would be greatly appreciated.

I'm a military reservist who puts all of my drill money into my TSP (401k), and the housing stipend I receive is not considered income. I am selling $4k worth of EE savings bonds, though... does that mean that I can contribute to an IRA up to the amount of interest earned from those bonds?

I don't think so. An IRA requires earned income, which the EE bond interest isn't.

That's right, EE bonds generate interest/dividends instead of earned income.  It's been decades since I've seen a EE 1099 but I think it was a 1099-INT.

In addition to MDM's link, here's another one clarifying earned income:
https://www.irs.gov/credits-deductions/individuals/earned-income-tax-credit/earned-income