what is investment income 
investment income is money received in interest payments dividends capital gains realized with the sale of stock or other assets and any profit made through another investment type 1 additionally interest earned on bank accounts dividends received from stock owned by mutual fund holdings and the profits on the sale of gold coins are all considered investment income income from long term investments undergoes different and often preferential tax treatment which varies by country and locality learn more about investment income and the types of investments you can generate income from understanding investment incomeinvestment income refers solely to the financial gains above the original cost of the investment the form the income takes such as interest or dividend payments is irrelevant to it being considered investment income so long as the income stems from a previous installment generally people earn most of their net income each year through regular employment income however disciplined saving and investment in the financial markets can grow moderate savings into large investment portfolios yielding an investor a sizeable annual income over time businesses often have income from investments on the income statements of publicly traded companies an item called investment income or losses is commonly listed this is where the company reports the portion of its net income obtained through investments made with surplus cash instead of being earned in its usual line of business for a business this may include all of the above as well as interest earned or lost on its own bonds that have been issued share buybacks corporate spinoffs and acquisitions investment income may be received as a lump sum or in regular interest installments paid out over time the interest accrued on a basic savings account is considered investment income it is earned on top of the original investments the deposits placed into the account which can make the account a source of income options stocks and bonds can also generate investment income whether through regular interest or dividend payments or by selling a security at a higher price than was paid any amount received above the original cost of the investment qualifies as investment income most but not all investment income is subject to preferential tax treatment when the income is realized the associated tax rate is based on how long an investment is held its type and an individual taxpayer s situation for example retirement accounts such as a 401 k or traditional ira are subject to taxes once the funds are withdrawn certain tax favorable investments such as a roth ira are not taxed on eligible gains associated with a qualified distribution 23 meanwhile long term capital gains and qualified dividend income are subject only to a maximum federal tax of 20 even if that amount exceeds a half million dollars in a given year 45compare that to the tax rates on earned income which range from 12 to 37 for the tax year 2022 the threshold for the top rate is above 539 900 578 125 for 2023 for individuals and 647 850 693 750 for 2023 for married couples filing jointly 67investment income can also be used in conjunction with an individual s earnings to provide income tax credits for example one of the criteria used to evaluate individuals for the earned income tax credit eitc is earning from running a small business and not having investment income over 10 300 for 2022 and 11 000 in 2023 89real estate transactions can also be considered investment income some investors purchase real estate specifically to generate investment income either from the cash flows generated from rents or any capital gains realized when selling the property once the original cost of the property is repaid by the investor and rent payments received are not used to cover other property related expenses the income qualifies as investment income example of investment incomesuppose an investor buys stock in company abc for 50 two weeks later the investor sells them for 70 netting a profit of 20 this is a short term investment so the gain is taxed at the investor s regular earned income tax rate federal tax law defines a short term investment as one owned for less than a year 4suppose the same individual invests 500 000 in real estate property the investor sells the property for 1 5 million 10 years later the investment is categorized as long term investment income and taxed at the long term capital gains tax 4the tax percentage depends on the overall income of the taxpayer here s how long term capital gain brackets work 1011