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Income is money, or some equivalent, that is received in a period of time such as a year or month. This can be contrasted with wealth that represents the storage of resources that can be used as money in future. The following are common types of income.
LabourA salary or wage that is paid in return for work.Business ProfitsThe net income of a business that creates and captures value.Tangible AssetsA tangible asset is a physical thing that has potential to generate income such as an apartment that can be rented.Intangible AssetsAn intangible asset is a non-physical thing that has potential to generate income such as a copyright on a song that generates royalties.
Capital GainsAn investment that goes up in value and is then sold resulting in a profit. For example, a stock that is sold at a higher price than its purchase price.DividendsDividends paid by a company that you own or partially own. This represents a share of profits generated by value creation.InterestLoaning money to a government, bank, business or other entity in return for interest payments.
Rent SeekingRent seeking is the practice of seeking more income without creating more value or taking any risk. For example, an industry that lobbies government to be paid a subsidy. Risk taking that doesn't create value but seeks income by trying to predict price changes. For example, buying the stock of a company because you think the price will increase as opposed to thinking the company will actually generate a profit.
Active IncomeIncome that results from direct value creation such as your labor or a business that you control. Assets that you directly control such as a rental property are also active income. Passive IncomeIncome that results from processes that require no participation. For example, the interest income or dividends from a stock purchase. Passive income requires capital.
Unearned IncomeIncome that doesn't create value but is the result of social programs or obligations such as pensions, old age payments, unemployment benefits, alimony and child support. In some cases, unearned income isn't taxed.NotesIn some cases, governments consider passive income such as interest and dividends as unearned. |
| Type | | | Definition | Money, or some equivalent, that is received in a period of time such as a year or month. | | Related Concepts | |
Finance
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