Ordinary income is taxable at the highest rates and includes wages, commissions, interest income, and some dividends. It is reduced by standard deductions, but self-employed individuals may need to track and remit taxes. Short-term capital gains may also be treated as ordinary income. Ordinary income is any type of income that is considered taxable at […]
Ancillary revenue is additional revenue generated by a business through the sale of goods and services that are not its main products. This helps improve financial stability and can be reinvested to promote growth. Examples include gas stations selling snacks and airlines offering drinks and snacks. The strategy is to attract customers to buy the […]
Gift income in the US is subject to a gift tax, but there are exclusions, such as a $13,000 exemption for individuals and $26,000 for couples. Recipients generally do not pay tax, but there are exceptions, such as gifts from employers to employees. Gifts that generate income are taxable, and the gift income exemption can […]
A comparative income statement is used to track a business’s progress over time, with columns for each income period and multiple rows for different sources of income. Gross income is listed first, followed by operating expenses, and net income is calculated. Analysts use this information to identify potential problems and bottlenecks in operations. When a […]
A contribution income statement (CIS) is an internal financial document that organizes data based on behavior rather than function. It is useful for cost analysis and evaluating department performance, and can be prepared quickly using accounting software. It is typically used alongside a more conventional income statement for external purposes. A contribution income statement (CIS) […]
Each US state can collect its own income tax, but some states do not charge one. Alaska, Nevada, South Dakota, Washington, Texas, Wyoming, and Florida do not collect state taxes. The amount of income tax an individual must pay depends on where they live, and some cities also impose income taxes on their residents. In […]
Net operating income is the profit a company makes after deducting operating expenses and cost of goods sold. It’s important for measuring profitability and making future plans. It’s also used to determine income taxes and should be analyzed alongside historical and industry data. Net operating income refers to the amount of money a company has […]
Reporting income to the IRS is not always straightforward, as there are various types of income that must be reported on federal tax returns. These include taxable distributions from education savings accounts, awards and recognition, gambling winnings, jury duty payments, and income from rental of personal property. Self-employment income must be reported on a Schedule […]
Imputed income is non-cash compensation that is considered part of an individual’s income, which can affect tax calculations. It can include non-monetary benefits such as a company car, moving expenses, and dependent care assistance. In some cases, imputed income is used in child support cases to assess a parent’s obligations. Imputed income is a value […]
The Low Income Housing Tax Credit is a federal program that provides tax credits to developers who build low-income housing. State authorities distribute the credits according to federal guidelines, and projects must meet income threshold requirements and maintain standards for at least 30 years. Investors can use the credits to reduce their tax liability for […]
Revenue expenses are costs for day-to-day business operations, while capital expenses are long-term investments. High revenue spend can make it hard to accumulate capital, but calculated capital expenses can reduce revenue expenses. Some income expenses may be tax-deductible. Revenue expenses are expenses related to the costs of doing business on a day-to-day basis. When companies […]
Operating income is the profit a company earns directly from its operations, excluding other sources of income. It is calculated by subtracting operating expenses from total sales revenue. Examining income from operations can provide insights into a company’s long-term health, while net income includes other sources of income beyond operations. Net income may be lower […]
Premium income is the money an insurance company receives from collecting premiums, which is one of their main sources of income. It must cover all expenses and claims, and is regulated by a governing body. Projections are made by the underwriting department to determine premium income for the year. Premium income generally refers to the […]
Portfolio income is earned from investments like stocks and bonds, and is one of three main types of income. It is important for retirement planning and can generate income through interest, dividends, and increased value. Ideally, investment income should be able to sustain retirees without touching the principal invested. Portfolio income refers to money earned […]
The gross rent multiplier (GRM) is a measure used by real estate professionals to evaluate the profitability of rental properties. It is calculated by dividing the sale price by potential rental income and can be used to compare properties in the same area. A lower GRM indicates higher earning potential, but it has limitations and […]
Fixed income analysis evaluates risks and values of fixed income securities, such as bonds, to determine which securities to buy, sell, or hold in an investment portfolio. It helps investors evaluate a security’s fair market value, estimate interest rate and credit risks, and quantify how investments may be affected. A fixed income analysis is the […]
Accrued revenue is money owed for products or services that have not yet been paid for. It is important for service-based businesses and can help increase sales, but can also put a company in a temporary financial hole. Accumulated income is crucial for determining a business’s value and acquiring loans. It generally only applies to […]
An insurance income statement records an insurance company’s profits and losses, calculated by subtracting expenses from income. Premiums and losses are documented, and expenses include claims payments, reserves, and agent commissions. The statement shows whether the company is sustaining risks and generating profits. An insurance income statement is a document that records all profits and […]
Unearned revenue, or deferred revenue, is income received before delivering goods or services. It is considered a liability until the recipient delivers the promised goods or services. Companies may seek unearned revenue by offering incentives for prepayment, which become assets over time. Sometimes referred to as deferred revenue, unearned revenue is compensation received before the […]
Exempt income, such as retirement funds, gifts, and government-provided income, does not need to be deducted from taxes. Government payments, municipal bonds, and some scholarships are also exempt. Exempt income is any money earned that does not need to be deducted from taxes. The reasons for this vary between different forms of income, but the […]
