What is included in investment income for individual taxpayers?
Investment income for individual taxpayers is the sum of gross income from property held for investment and includes interest income, short-term capital gains, and nonqualified dividends. Net long-term capital gains and qualified dividends may be included if the taxpayer elects to forgo preferential treatment.
Investment income for individual taxpayers can come from a variety of sources and can include the following:
1. Interest Income: This is earned on investments such as savings accounts, certificates of deposit (CDs), bonds, and treasury bills.
2. Dividend Income: This is earned on stock investments and mutual funds that pay out a portion of their profits to shareholders.
3. Capital Gains: This is the profit earned on the sale of stock, mutual funds, or other investments that have increased in value since they were purchased.
4. Rental Income: This is earned by owning and renting out properties, such as apartments or commercial buildings.
5. Royalty Income: This is earned by individuals who have copyrights or patents on their creative works.
6. Annuity Payments: This is income received from annuities, which are investment products that provide a guaranteed stream of income in exchange for a lump sum payment.
It is important to note that all investment income is subject to taxation, and the tax rate may vary depending on the type of income, the amount earned, and the individual’s tax bracket.
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