Distinguish earned income from unearned income and provide an example of each

Distinguish earned income from unearned income and provide an example of each

Income from sources other than employment is unearned income. Unearned income is derived from passive investments, such as interest from savings, bond, alimony, dividends from stocks. Unearned income is not acquired through work.

Earned income on the other hand refers to income derived from employment and through work. Disability payment is also considered earned income. Among others earned income include wages, salaries, and tips. The tax implications for each type of income differ greatly. They are both taxed at a different rate and are treated differently.

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