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Unearned vs. earned income

By Justin Parker - Feb. 20, 2023

The difference between unearned and earned income is that unearned income represents money that a person gets without having to provide a service or a sale of a product, while earned income represents money made by someone for the completion of work.

Unearned income refers to money from sources other than a worker's labor or effort, such as investments, rent, or inheritance. It's income received without the recipient having to work or perform services to earn it.

Earned income is different from unearned income in that it is money received as a result of a worker's own labor or effort, such as a salary, wages, or self-employment income. This income is earned by working for someone else or running a business.

In most cases, earned income is considered taxable income. However, unearned income may or may not be considered taxable income. This depends on the source and specific circumstances. For example, interest from an individual's savings account can be considered unearned income and taxed appropriately.

Unearned vs. earned income

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