Ordinary Income

Ordinary Income refers to the earnings generated from standard business activities or sources of income that are taxed at regular income tax rates. This includes wages, salaries, bonuses, rental income, interest income, and dividends. Ordinary income is distinct from Capital gains, which arise from the sale of Assets and are typically taxed at different rates.

Examples:

• Wages and Salaries: Income received from employment, such as a monthly payCheck.
• Business Income: Profits earned by a Sole Proprietorship or partnership from regular business operations.
• Interest Income: Earnings from Savings Accounts or Bonds.
• Rental Income: Money received from leasing out property.
• Dividends: Payments received from owning Shares in a Corporation, considered ordinary if they are from regular operations.

Cases:

• A freelancer earns $50,000 from various projects throughout the year