Everything You Need to Know About Unearned Income

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Many people dream about living off passive income. The concept of working hard and creating a perpetual stream of income is appealing.

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Instead of working eight hours per day or more, you can work much less. Suppose you make some smart moves by investing in rental real estate or dividend stocks.

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These income sources are different from receiving a regular salary in a 9-to-5 job. The Internal Revenue Service (IRS) considers these sources of income and several others as unearned income.

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Investment Income

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

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Dividend Income

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

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Everything You Need to Know About Unearned Income

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. Suppose you make some smart moves by investing in rental real estate or dividend stocks.

These income sources are different from receiving a regular salary in a 9-to-5 job. The Internal Revenue Service (IRS) considers these sources of income and several others as unearned income.

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.

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

Long-Term Capital Gain Distribution

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.

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

Retirement Income

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