What type of income is reduced by the earned income exclusion?

The earned income exclusion is specifically designed to assist individuals with disability-related benefits by allowing them to exclude a certain amount of their earnings from being counted towards their income limits for various government assistance programs. This exclusion applies solely to earned income, which includes wages, salaries, tips, and other income derived from performing work.

By reducing earned income, individuals may remain eligible for benefits while still being able to work and earn additional income, potentially improving their overall financial situation. This is particularly important in encouraging employment among individuals with disabilities without fear of losing essential support.

Other types of income, such as unearned income, investment income, and self-employment income, are generally treated differently in the context of most benefit programs and do not engage the earned income exclusion provisions. Thus, the focus on earned income signifies the program's aim to incentivize work while protecting access to necessary assistance.