What is the Difference Between Earned and Unearned Income?
A few months ago my partner and I, Richard Walrath, wrote an article on Income Mobility and a reader recently sent us an inquiry on the subject. After a couple e-mails back and forth it finally occurred to me this reader was not completely aware of the difference in Earned and Unearned Income and I started wondering if other people are also confused on the subject. Earned Income is any income derived from employment for services rendered. If you are a contractor build a house, and get paid for your services, that is earned income. If you are a contractor, get an advance payment for building the house, that is unearned income, once you build the house the unearned income then becomes ‘earned’ income. Other forms of unearned income are civil service annuities, workers’ compensation, unemployment compensation, life insurance proceeds (over and above the cost of the deceased last illness and burial), gifts, support and alimony (either in cash or in-kind), prizes and awards, dividends and i
