Investment income and other income : an important difference

Investment income and other income : an important difference
0 comments, 15/01/2014, by , in Personal Finance

An important distinction in investment strategy is the difference between investment income and other incomes.

With an oversimplification, we can say that capital the income are those that arise from certain events: for example, loans are made by private bond coupon payments. They are then the interest income from loans from deposit accounts, bank current accounts and interest on government bonds. They also fall into the profits category and dividends arising from investments in associated companies, insurance contracts and social security funds.

Other Investment Income

Other Investment Income

On the other hand, other income are those produced by uncertain events, for example, for a bond consist of capital gains, that is, the appreciation in value of the security, ie the gain resulting from the difference between the sale price and the purchase price. There are different income and capital gains income resulting from derivative instruments.

Keep in mind this distinction is important because the two types of income are taxed in different ways: for capital income taxation there is gross of expenses of production, while other income is the net of production costs and any losses .

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