Unearned Income:  9 Types You Need to Know About

Many people dream about living off passive income. The concept of working hard and creating a perpetual stream of income is appealing. Instead of working eight hours per day or more, you can work much less.

Unearned income is income from sources, not from employment or a job. The IRS views unearned income as income from sources other than personal effort.

What is Unearned Income?

1. Investment Income

Investment income is the profit generated from the sale of real estate or stocks. An investor selling an asset for profit will generate capital gains from the sale.

Types of Unearned Income

2. Long-Term Capital Gain Distributions

Mutual funds pay capital gains distributions to shareholders. This money comes from selling stocks, bonds, or other assets owned by the mutual fund. 

Types of Unearned Income

3. Dividend Income

Dividend income results from money paid to stockholders from the dividends paid by companies. An investor can generate passive income and possibly live off dividends.

Types of Unearned Income

4. Retirement Income

Retirement income is derived from pensions, annuities, and distributions from 401(k) plans and Individual Retirement Accounts (IRAs).

Types of Unearned Income

5. Unemployment Benefits

Unemployment benefits are paid to individuals who lose their jobs through no fault of their own.

Types of Unearned Income

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