Realized income is another way of saying taxable income. This is the opposite of unrealized income, which is income such as the appreciation of investments that has not been converted into cash flow. Calculating your realized income is important in terms of paying taxes. It is also is useful for analyzing your financial situation and possibly converting more income into the non-taxable category.
Add any wages, salary, bonuses, employer compensations, commission or tips for a particular period of time. For example, if you earned wages equaling $40,000 plus $5,000 in commission, you would start with a total of $45,000 over the period of one year.
Add any money that you made from the sale of goods or services. If you start a personal photography business on the side, for example, add payment that you receive for photo shoots and pictures. Consider a situation in which you make $15,000 in sales for your photography services. You would add this to the earlier amount of $45,000 to achieve a total of $60,000.
Add other income that you may receive, such as alimony, rent, capital gains, retirement income, or interest and dividends. Continuing with the previous example, consider a situation in which you receive rent for the total of $12,000. You would add this to your previous total of $60,000 to get a realized income of $72,000 for the year.
Consult the Internal Revenue Service website if you receive a form of payment or benefits about which you have questions.
- Internal Revenue Service: Taxable and Non-taxable Income
- MSN Money; 8 Types of Income the IRS Can't Touch; Jeff Schnepper
- "The Millionaire Next Door;" Thomas J. Stanley; 1998
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