Unearned Income Law and Legal Definition

Unearned income refers to that income which has not been earned from work. Income arising out of rent, land or property, dividend, interest, profit from investments, gifts is treated as unearned income. Unearned income differs from earned income. Earned income is the income accrued from rendering employment services. Social Security benefits are also unearned income.

The following is an example of the federal statute defining unearned income:

42 USCS § 1382a defines unearned income as all other income, including:

1. any payments received as an annuity, pension, retirement, or disability benefit, including veterans' compensation and pensions, workmen's compensation payments, old-age, survivors, and disability insurance benefits, railroad retirement annuities and pensions, and unemployment insurance benefits;

2. prizes and awards;

3. payments to the individual occasioned by the death of another person, to the extent that the total of such payments exceeds the amount expended by such individual for purposes of the deceased person's last illness and burial;

4. support and alimony payments,

5. rents, dividends, interest, and royalties

6. any earnings of, and additions to, the corpus of a trust established by an individual