Earned Income

• You work for earned income. Earned income includes wages, salaries, tips and net profit from a business in which you actively participate. With survivor benefits, you receive payments based on the work of another person.
  
  

Unearned Income

• Unearned income includes interest, dividends, capital gains and rents. It also includes trust distributions and capital gains. The Internal Revenue Service includes Social Security survivor annuities in Publication 501 as unearned income. The Social Security Handbook defines unearned income in three categories. In-kind food and shelter received because someone else paid for it is unearned income for Social Security purposes. So are private pensions and annuities. The third class of unearned income is periodic public payments such as Social Security and Veteran's benefits. This includes need-based benefits, worker's compensation and unemployment compensation.
  
  

States Define Unearned Income

• The Alaska Health and Human Services manual includes retirement, survivors and disability payments as unearned income. The Illinois Department of Human Services includes government benefits, private pensions and union benefits, cash contributions, interest, rental income and income from a trust fund as unearned income.
  
  

Other Definitions

• The Employment Support Institute at Virginia Commonwealth University details unearned income categories on the Work World website. Four classes of unearned income include periodic benefits, payments in lieu of earnings, welfare assistance, and periodic and determinable allowances. The Social Security survivor benefits annuity fits into the periodic benefits category, along with retirement, pensions, disability and lump-sum payments for delays.
  
  

Verification of Unearned Income

• Sometimes unearned income requires verification for federal and state applications. The Social Security Administration provides Form SSA-1099 each year with the total benefits received by the survivor. You may obtain interim verification from the local Social Security office. Verification should contain the monthly benefits amount, the name and address of the survivor, and any deductions from the payment.