Definition of Unearned income:
Unearned income is income from investments and other sources unrelated to employment. Examples of unearned income include interest from savings accounts, bond interest, alimony, and dividends from stock. Unearned income, known as a passive source of income, is income not acquired through work.
Income from investments rather than from work.
Accounting: Income received before a good is sold or a service is provided. Unearned income is classified as a current liability on the balance sheet until it is recognized as earned income during the accounting cycle.
Taxation: Income derived from means other than the provision of personal efforts, such as that derived as dividends, interest, or rent. Pensions and royalties, however, are not considered unearned income.
Unearned income differs from earned income, which is income gained from employment, work, or through business activities. It cannot be used in contributions to individual retirement accounts (IRAs). According to the Internal Revenue Service (IRS), earned income includes wages, salaries, tips, and self-employment income. .
How to use Unearned income in a sentence?
- Before retirement, unearned income can serve as a supplement to earned income; often it is the only source of income in postretirement years.
- Unearned income is income that is not earned, meaning it is derived from another source, such as an inheritance or passive investments that earn interest or dividends.
- When trying to break down your current financial state you can count some unearned income to figure out your net worth.
- Tax rates on unearned income are different than rates on earned income.
- As the dividend is unearned income of the recipient, it does not qualify for pension contributions.
- The unearned income was not realized in our reports so we had to contact the analyst to update our records.
- I wondered how we got money before the sale was complete and my manager told me about unearned income and how it worked.
Meaning of Unearned income & Unearned income Definition