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How does unearned income impact taxes?

Unearned income might impact your taxes.


It is taxed at a different rate than earned income.

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What is unearned income?

Unearned income is money that you’ve made that is not linked to a job or business that you own. This can include income from interest, dividends, and pensions. Read more here.

This is also sometimes known as ‘passive income.’ Generally, it is only a few dollars at a time but it will help to increase the money you have.

Earned income on the other hand is money brought in from tips, wages, profits and union strike benefits.

How does it impact my taxes?

Your Adjusted Gross Income (AGI) includes both unearned and earned income for tax return purposes. However, unearned income is taxed differently.

Unearned income is taxed at a lower rate. Interest made on savings is taxed at the usual rate, but share dividends have different rates.

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