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Earned income is pay you receive for work you perform, and includes salaries, wages, tips, and professional fees.
Your earned income is included in your gross income, along with unearned income from interest, dividends, and capital gains. If you have earned income, you're eligible to contribute to an individual retirement account (IRA).
earned incomethat part of a person's income earned from employment or self-employment (WAGES, SALARIES, FEES. COMMISSIONS and PROFITS). By contrast unearned income derives from the ownership of assets (interest and dividends from investment, rents from property, etc.) or can take the form of unemployment benefits, old age pensions, etc. See INCOME.
earned incomethe return accruing to LABOUR for work done. The distinction between earned and unearned INCOME is made by the INLAND REVENUE for ease of assessment and collection of INCOME TAX. Earned income comprises WAGES, SALARIES, FEES, COMMISSION and PROFITS attributable to sole proprietors and partners within partnerships. Unearned income, by contrast, is primarily the return accruing to NATURAL RESOURCES and CAPITAL in the form of rental income, DIVIDENDS or INTEREST received. Earned income is generally taxed progressively, commencing with a tax-free income band and progressively increasing the rate of TAXATION in predetermined bands of income as income increases.
The distinction between earned and unearned income is not a valid one in economics as all FACTORS OF PRODUCTION can be said to ‘earn’ income. Even from the taxation authorities'view, the distinction has been controversial, the argument being put forward that unearned income is the result of investing from the SAVINGS of income previously earned. See INCIDENCE OF TAXATION, PROGRESSIVE TAXATION.