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But what are the different possible incomes that you can earn for yourself? How will this information help you at this stage? If the various definitions of income interest you, then definitely you’d like to know what they are really and how you would want to get them. When you know the different types of income, you will have a good idea where to scour for them and how to earn them. In the end, you will have unlimited methods of inviting cash into your business.

Rent

Perhaps one of the most popular and common types of income these days is renting. This explains the relationship between the lessor, or the borrower, and the lessee, or the lender. This is a type of agreement where the latter receives payment from the former for the temporary utilization of a property such as land, which is owned by the lessee. The contract can either be verbal (if you are friends or you have already established trust and commitment to each other) or written. The latter is highly recommended since you will be properly protected by the contract. You can also have some references when it comes to payment terms, mode of payments and collection, as well as the reasons for payment.

Rent can also be defined as purchasing the services of others for a specific amount of time. For example, when you stay at a hotel, you will be paying for the room, which you will occupy for a considerable number of days. When you’re in an Internet café, you will be renting out a computer, for a specific number of hours or even days. Even the money that you will hand to the taxicab driver is also a form of rent. You’re paying for the services while you are also renting the taxicab.

Wages

If you are working for someone else, you can earn some income for the services that you’ve rendered. There are actually different forms of wages that you can enjoy, and it depends on the policies of the company. For instance, you have the base period wages and the benefit year wages. The former can refer to the wages during the employment period and is paid during the time of the base period of the claimant. The benefit year wages, on the other hand, refers to the wages that a claimant can earn during his/her benefit year, including the partial benefits during unemployment.

Bonuses

You can also expect some bonuses from your clients. Bonuses vary greatly too. There are mandatory bonuses, which means these should be given by the company because it’s in their policy or they are required by law to do so. The amount can be fixed, it can be rated. You can also receive performance bonuses, which can be given monthly, quarterly, semi-annually, or annually. These are normally provided by clients to you for your exceptional service, such as when you exceeded your quota, produced quality work, or extended superior customer service to them. When reporting for your taxes, bonus income will be treated as additional income to your company and shall be included in the calculation for your taxes.

Commission

This is a type of income that is being treated as a form of reward for salespeople for every product they have sold or services they have offered to their customers. These are normally calculated using a base percentage in relation to the goods sold or number of times the services have been provided.

A commission can either be the sole earning of an employee or can be treated as an addition to his basic or fixed salary. Regardless of the type, though, the main purpose of commission is to provide incentives to employees—that they may be encouraged and motivated to work harder.

Overtime

If there has been a designated time that has been determined by you and the client in delivering the expected service, and you have been requested to go beyond the duration (or standard working hours), you can expect an overtime pay, which will then be added to your income. The number of working hours can be determined based on the tradition of the client or the company you’re working for, the standard established by the industry, as designated by law, or as agreed between you and the client. So, for example, if you have standard working hours of 8, which could be from 8 to 5 (with 1 hour’s worth of lunch break), you will be paid for every product produced or services rendered beyond 5:00 p.m. This will be in addition to your basic pay. Now, if you have been paid with a fixed salary or that you have decided to earn by the hour, you may want to be very careful about this one. You may meet several clients who would like their employees or staff or their virtual personal assistant to do more, and yet they don’t pay you for the extra time. You can run to the designated state or federal agency that protects the right of workers, or you can come up with your own time records. This way, all you need to do is to present these to them whenever you’re about to collect for your salary or income, or when you need some proof for your dispute.

Fringe Benefits

A fringe benefit is something that you get in relation to your performance of a particular service. It can be an addition to your fixed income.



Taxable Income

Taxable income is a part of your income that you should declare to your government for taxation purposes. In general, it could refer to the gross income of a corporate or a single entity, which has already been deducted by the cost of goods sold or expenses that have already been incurred. There are a lot of technicalities that surround the idea of taxable income, because rates may vary, and your liability to the government can either go higher or lower.

In the United States, taxable income is clearly defined in the Internal Revenue Code 63. A taxpayer can have the liberty on what kind of deduction they want to take for their taxes. They can opt for a standard deduction, wherein you cannot specify the items that can be considered as taxable or not. This can be better expressed in this equation:

Gross Income – Standard Deductions Allowed = Taxable Income

Another type of taxation for your income may include the deduction of personal exemptions. These are items that should not form part of the taxable income and should not be deducted by tax. However, they are included in the income statement for reporting purposes:

Adjusted Gross Income – Itemized Deduction – Personal Exemption = Taxable Income

Non-taxable Income

This is self-explanatory. Non-taxable income is something that you earn for yourself or your company. However, as mandated by the government, they are exempted from the calculation of your tax. Non-taxable income, however, could be reported for the purpose of transparency.

There are two common kinds of non-taxable income. The first one is referred to as the partnership income. The partnership return is also not taxable, but you should be able to file an information return using the U.S. Return of Partnership Income or form 1065. This document will reflect the performance of the operation of the partnership in a given tax year.

The other one is called S Corporation income. The income, deductions, losses, and credits are all distributed to the shareholders based on their shares in the corporation. Just like in partnership income, the items must be reported in your tax return, though they cannot be subjected to any deduction.