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Income is the money an individual or business receives in exchange for providing a good or service or through investing capital

Types of Income

Income can be divided into two primary categories: earned and unearned income.

Earned Income:

This is the income received in direct exchange for work, including salaries, wages, tips, commissions, and income from self-employment.

Unearned Income:

Unearned income is money received without a direct link to employment or business activity. It includes interest from savings, dividends from investments, rental income, and royalties.

Key Characteristics of Income

The main features of income include its regularity and dependence on one's work or business activities. Income is often subject to taxation, the rates of which may depend on the total amount and source.

Differentiating Income and Capital Gains

Nature of Acquisition

Income is generally received in exchange for goods, services, or work, while capital gains arise from the successful selling of investments or assets.

Tax Implications

In many regions, income is subject to a higher tax rate than long-term capital gains, making the latter more tax-efficient.

Frequency and Regularity

Income is typically received on a regular basis, such as weekly or monthly, while capital gains are realized only when assets are sold.

Risk and Reward Factors

Income generation is often perceived as lower risk but provides a steady stream of funds. Capital gains, however, may carry higher risk with the potential for higher rewards.


  • A salaried employee's earnings
  • A freelancer's payment for a project
  • Interest earned on a savings account
  • Staking rewards
  • Airdrops

These are typically taxed at a person's income tax rate based on their tax bracket.

Please note that depending on the Jurisdiction some of these examples might not be considered income.


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