Which types of income are classified as unearned income?

Unearned income refers to income that is not derived from the direct provision of labor or services. Instead, it usually comes from investments or the ownership of assets. Interest, dividends, and capital gains fall into this category because they arise from financial investments rather than a direct exchange of labor for pay.

Interest is earned from savings accounts, bonds, or other financial instruments. Dividends are distributions of profits by a corporation to its shareholders, representing a return on investment in the company's stock. Capital gains occur when an asset, such as stocks or real estate, is sold for more than its purchase price.

This classification differs from earned income, which includes wages, salaries, business profits, and compensation – income that results from work or active engagement in a business. The other choices contain forms of income that result from labor or direct economic activity, which do not categorize as unearned income.