What is considered earned income?

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Earned income is money you receive for working or for providing a service. Wages from a job and net earnings from self-employment are earned income because they come directly from the labor you perform. In contrast, interest from a bank account is unearned income since it comes from capital you own, not from work. Unemployment benefits are government benefits and are also considered unearned income, not pay for labor. Pension payments are retirement income and counted as unearned for this purpose. Understanding this distinction helps with rules and credits that use earned income, such as credits whose eligibility depends on income from work.