Value Earned Income over Unearned Income
Earned income is income derived from active participation in a trade or business
- Wages, salaries, bonuses, commissions, tips
- Earnings from self-employment
Unearned income refers to income received by virtue of owning land & property, inheritance, pensions and payments received from public welfare. Income from investments and other sources unrelated to employment services.
The three major forms of unearned income based on property ownership are
- rent, received from the ownership of natural resources;
- interest, received by virtue of owning financial assets; and
- profit, received from the ownership of capital equipment.