What is considered unearned income?

Prepare for the Jackson Hewitt Tax Test with our comprehensive study guide featuring multiple-choice questions, hints, and detailed explanations. Ace your examination with confidence!

Multiple Choice

What is considered unearned income?

Unearned income is money you receive without actively working for it. Interest from a bank account grows whether you’re working or not, and unemployment benefits come from government programs rather than from current labor. Retirement income and pension payments come from past work or investments, not from your current wages. Wages from a job and self-employment income are earned income because they come directly from work you perform. Capital gains from selling stock come from investment activity, not from wages, so they’re not earned income. The example that lists bank interest, unemployment benefits, and retirement/pension matches the idea of income you receive without working, which is why it’s identified as unearned income.

Unearned income is money you receive without actively working for it. Interest from a bank account grows whether you’re working or not, and unemployment benefits come from government programs rather than from current labor. Retirement income and pension payments come from past work or investments, not from your current wages. Wages from a job and self-employment income are earned income because they come directly from work you perform. Capital gains from selling stock come from investment activity, not from wages, so they’re not earned income. The example that lists bank interest, unemployment benefits, and retirement/pension matches the idea of income you receive without working, which is why it’s identified as unearned income.

More practice questions