What type of income qualifies for contribution to an IRA?

Contributions to an Individual Retirement Account (IRA) must be made from what is classified as earned income. Earned income includes wages, salaries, tips, and other compensation received for personal services. This is the core reason why wages and salaries are eligible for IRA contributions: they represent income earned through active work or effort.

While investment income from stocks, passive income from rental properties, and gifts or inheritances are valuable sources of financial support, they do not qualify as earned income. Investment income is derived from the capital that has already been invested, while rental income may be considered passive and does not reflect direct personal effort through employment. Gifts and inheritances are transfers of wealth rather than income earned from labor or services provided. Therefore, the only income type that allows for IRA contributions is earned income such as wages and salaries, making it the correct answer.