Are long-term disability benefits received prior to the minimum retirement age considered earned income?

Long-term disability benefits received prior to the minimum retirement age are classified as earned income because they are typically provided as a result of employment and based on the individual's prior earnings. These benefits are often designed to replace a portion of the income lost due to the inability to work caused by a disability.

The distinction lies in the purpose of the benefits, which are intended to support individuals during their period of disability, effectively functioning as a continuation of earning potential even though the person may not be actively working. Consequently, such benefits may be subject to income tax and can be considered in calculations for various financial assessments, including eligibility for programs that consider earned income.

In contrast, other options might suggest that these benefits are not earned income due to their nature as disability benefits or might imply varying degrees of income classification based on state regulations. However, the primary understanding in this context aligns with categorizing them as earned income, supporting the view that these payments are indeed tied to the participant's previous employment and earnings history.