Unearned Income: The Crucial Things You Need To Know

Unearned income is income from sources, not from employment or a job. 

What is Unearned Income?

The IRS views unearned income as income from sources other than personal effort. For example, income from a salary, wages, tips, self-employment, and a few other sources are earned income. However, a person must put in the effort to make this income

Types of Unearned Income

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Investment Income

Investment income is the profit generated from the sale of real estate or stocks. An investor selling an asset for profit will generate capital gains from the sale.

Dividend Income

Dividend income results from money paid to stockholders from the dividends paid by companies. An investor can generate passive income and possibly live off dividends.

Retirement Income

Retirement income is derived from pensions, annuities, and distributions from 401(k) plans and Individual Retirement Accounts (IRAs). Social Security retirement benefits are included in this category.

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