Ordinary income

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Ordinary Income is a term in tax law that comprises:

  • Salary & wages
  • interest on corporate & government bonds
  • most REIT dividends
  • IRA distributions
  • pension income
  • Social Security income (to the extent it's taxable)
  • rental property income
  • "Schedule C" income - from self-employment
  • royalty income
  • many preferred-stock dividends, in particular MIPS, QUIPS and other "hybrid" securities

These categories of income are all taxed at ordinary income rates. Compare to capital gains, which many investors prefer because of the lower taxation.

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