unearned income

1. Individual income, such as dividends, pension payments, and capital gains, that is derived from something other than personal services. Compare earned income.
2. For a business, income that has been received but not yet earned. For example, a computer manufacturer sells a three-year warranty that customers pay in full when they purchase equipment. Only a portion of the payment is recorded as earned income during the first year, while the remainder is considered unearned income that will be applied in subsequent years.