Income is money or something of equal value that an individual or business receives from providing a service, product or investment. Income is necessary for the day-to-day expenses in an individual’s life. Sources of income may vary based on profession and age. For example, investments, social securities, pension are income for the elderly.
For salaried professionals, monthly salary is the source of income. For businesses, Earnings is the income after paying off expenses and Taxes. Individuals gain income through earning on a daily Basis and by making investments. Dividends are also income. In most of the countries, the government taxes income before it is given to the individual. The revenue that comes from these income taxes is used by the government for the benefit of the country and state budgets.
The Internal Revenue Service (IRS) calls income from sources other than a job, such as investments as ‘unearned income’.
The types of income are mentioned below:
The income that an individual receives from wages, salaries, interest, dividend, business income, pensions, Capital earning during a tax year is considered Taxable Income in many countries including the United State of America.
Mentioned below are some other income that will be taxed:
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Income that is exempted from tax includes income from treasury securities, municipal Bonds.
Income that is taxed at lower rates includes qualified dividends, Capital Gains that are long-term, social security income, etc. However, note that social security income is taxable at times depending on the amount of other income you may receive during a year.
Disposable income refers to the amount of money you have left after paying off your taxes. This income is then spent on purchasing necessities.