What is Income?

The short answer to that question, at least as it applies to taxable income, is that income is anything and everything that isn't otherwise stated as not being income. Convoluted perhaps, but that’s how the tax law works. If you receive payment, cash inflow, as a general rule, unless those monies are in some way specifically excluded (under our tax laws) from being considered income, the funds are taxable income.

If I were to give $10,000 to one of my children, that would not be income because the tax law specifically provides for such payments as being gifts, which are defined in this case as not being income. On the other hand, if someone did some work for me, and in return I paid that person $10,000, that would be income to that person. – whether or not deductible by me.

If you have an account in a bank, and you get interest on your money, then the interest on that money is taxable income. One of the reasons is because it is defined as such in the tax law. If you win a prize in a contest/sweepstakes, whether or not you actually made any serious effort to enter, that is taxable. It’s taxable because nowhere in the tax law does it say it isn't. In fact, the tax law does say that such prizes/awards are taxable income – but more importantly, the tax law does not say that it is not income.

If you have any questions contact Kal Barson at kal@barsongroup.com.