From the course: Finance Foundations: Income Taxes
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Ordinary income and capital gains income
From the course: Finance Foundations: Income Taxes
Ordinary income and capital gains income
- Let's talk about the two different kinds of income. There's ordinary income and there's capital gains income. Ordinary income is just what it sounds like. Ordinary income is justwhat it sounds like: ordinary income such as wages, salary, Ordinary income such as wages, salary, and interest on your bank account. Capital gains income arises Capital gains income ariseswhen you make an investment when you make an investment and the value of the investment increases. Let's say you have a stock portfolio. Hopefully you're going to buy low and sell high. Let's say I buy at $1000 and then sell at $1300. The $300 increase is called capital gains income. So there's ordinary income, wages, salary, interest on bank accounts. interest on bank accounts, And there's capital gains income. Income from the increase in value of investments. World wide and particularly in the United States, Capital gains income is typically taxed at a lower rate than is ordinary income. Now we could get in a long…
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