DEFINITION of 'Disqualifying Income'

A type of income that can disqualify an otherwise eligible taxpayer from receiving the earned income credit. Disqualifying income consists of both taxable and tax-free interest, dividends, net income from rents and royalties, net capital gains and net passive income not received as a result of self-employment.

BREAKING DOWN 'Disqualifying Income'

Taxpayers are only disqualified from receiving the earned income credit if they receive more than a certain amount, which is adjusted annually for inflation.

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