Tax Concepts

Unearned Income

Unearned income is income not generated from wages or active work, such as interest, dividends, or some investment gains.

Quick answer

Unearned income is income not generated from wages or active work, such as interest, dividends, or some investment gains.

It matters because different credits, surtaxes, and planning strategies can depend on whether income is earned or unearned.

Dividend income from a brokerage account is generally treated as unearned income.

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Plain-English Definition

What Unearned Income means

Unearned income is income not generated from wages or active work, such as interest, dividends, or some investment gains.

Why it matters It matters because different credits, surtaxes, and planning strategies can depend on whether income is earned or unearned.
Simple example Dividend income from a brokerage account is generally treated as unearned income.
Related Questions

Questions people ask about Unearned Income

What does Unearned Income mean?

Unearned income is income not generated from wages or active work, such as interest, dividends, or some investment gains.

Why does Unearned Income matter?

It matters because different credits, surtaxes, and planning strategies can depend on whether income is earned or unearned.

What is a simple example of Unearned Income?

Dividend income from a brokerage account is generally treated as unearned income.

When should I ask a CPA about Unearned Income?

Ask a CPA when the term affects your tax bill, estimated payments, deductions, or a planning move before year end.

How is Unearned Income different from Earned Income Tax Credit?

Unearned Income means Unearned income is income not generated from wages or active work, such as interest, dividends, or some investment gains. Earned Income Tax Credit means The earned income tax credit, or EITC, is a refundable tax credit for eligible workers with earned income who meet income and other requirements. The difference is that they apply to different tax, accounting, or business situations and should not be treated as interchangeable.

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