Earned Income

What is 'Earned Income'

Earned income is income derived from active participation in a trade or business, including wages, salary, tips, commissions and bonuses. This is the opposite of unearned income.

BREAKING DOWN 'Earned Income'

Earned income includes any income that a person or company receives for work they have done. If your boss gives you an advance on your next check, this would be considered unearned income because you haven't yet done anything to earn it.

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RELATED FAQS
  1. Does unearned revenue affect working capital?

    Learn how an unearned revenue, or deferred revenue, account affects a company's current liabilities and calculation of the ... Read Answer >>
  2. How do I represent unearned revenue for a small construction company?

    How do I represent unearned revenue without killing my income statement? As a small construction company, we have a lot of ... Read Answer >>
  3. How can I reduce tax liability on an annuity distribution?

    I was forced to cash in on an annuity (I was the surviving beneficiary). I tried offsetting the tax I ... Read Answer >>
  4. What is the difference between gross income and earned income?

    Being able to distinguish between earned income and gross income is an important tool in preparing for and filing your individual ... Read Answer >>
  5. Can additional income from a LLC affect Social Security income as taxable?

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