How is rent categorized in terms of income types?

Rent is categorized as unearned income because it is derived from investments rather than from active work or services. Unearned income refers to money earned from sources where individuals do not have to exert effort to receive it — such as interest, dividends, and rental income from property. When someone rents out a property, they receive payments without providing direct services related to those payments during the rental period. This passive stream of income is distinct from earned income, which comes from employment or active participation in a business where the individual is directly engaged in work activities. Understanding this classification helps clarify how different types of income are taxed and reported, particularly in relation to tax obligations and potential deductions.