Income Basket

AAA

DEFINITION of 'Income Basket'

Categories for which various sources of income are allocated based on United States tax regulations. Each basket has a net gain or loss, which may not be applied to any other basket as a means to reduce taxable gains.

INVESTOPEDIA EXPLAINS 'Income Basket'

For example, let's look at a situation where you have a net loss in one income basket, with an equivalent net gain in another. Ignoring baskets, your net income is $0, as the loss offsets the gain, meaning you will not have to pay any taxes. However, because U.S. tax code specifies that baskets can't overlap, the net loss cannot be applied to the net gain. Unfortunately, you will have to pay any applicable income taxes on the basket with a net gain.

RELATED TERMS
  1. Recognized Gain

    When an investment or asset is sold for an amount that is greater ...
  2. Income Tax

    A tax that governments impose on financial income generated by ...
  3. Capital Gain

    1. An increase in the value of a capital asset (investment or ...
  4. Taxable Gain

    A profit on the sale of an asset that is subject to taxation. ...
  5. Recognized Loss

    When an investment or asset is sold for less than its purchase ...
  6. Deferred Tax Asset

    A deferred tax asset is an asset on a company's balance sheet ...
RELATED FAQS
  1. What's the difference between regressive and progressive taxes?

    The U.S. federal tax system and local and state tax systems are complex in that they combine progressive, regressive and ... Read Full Answer >>
  2. What are the differences between regressive, proportional and progressive taxes?

    Tax systems fall into three main categories within the tax code: regressive, proportional and progressive taxes. Regressive ... Read Full Answer >>
  3. What is the difference between an operating expense and a capital expense?

    An operating expense (OPEX) is an expense required for the day-to-day functioning of a business. In contrast, a capital expense ... Read Full Answer >>
  4. What are some of the arguments in favor of a value-added tax (VAT)?

    A value-added tax (VAT) offers several advantages over an income tax or traditional sales tax. It raises needed government ... Read Full Answer >>
  5. How is compound interest taxed?

    Compound interest is money that is earned and added to a principal balance and then earns additional interest. Adding interest ... Read Full Answer >>
  6. According to the law of supply and demand, what is the effect of an increase or decrease ...

    Standard economic analysis shows that taxes of any form, including income taxes, tend to cause deadweight loss in the market. ... Read Full Answer >>
Related Articles
  1. Retirement

    Tax Tips For The Individual Investor

    We give you seven guidelines to help you keep more of your money in your pocket.
  2. Retirement

    Avoiding Too Much Tax On Your Distributions

    IRA assets can't be taxed twice - find out how to avoid paying the second time around.
  3. Savings

    Tax-Saving Tips For Canadian Taxpayers

    Find out how to get a bigger return.
  4. Taxes

    Surviving The IRS Audit

    Keeping thorough records and knowing the penalties make this experience easier than you'd expect.
  5. Taxes

    Are Taxes the Solution for Income Inequality?

    Income inequality continues to increase. Why? And are taxes the solution?
  6. Retirement

    Some Tax Considerations For Your Retirement Income

    Even if you don’t plan to retire, it’s still a good idea to think ahead about where to live, your income and how it all interacts with Social Security.
  7. Taxes

    What is Withholding Tax?

    Withholding tax is the income tax federal and state governments require employers to withhold from employee paychecks.
  8. Taxes

    OK, So I'll Be Smarter Next Tax Time

    5 tax resolutions to start on right now for a smoother tax return next April 15.
  9. Taxes

    What To Do If You Lost Your W-2

    There's no need to panic if you don't have your Form W-2 to file taxes, there are easy ways to gain access to the missing form or file without it.
  10. Taxes

    Will Itemized Deductions Get You A Bigger Refund?

    April and taxes are due soon. If you need to file your return, you might have to decide if itemizing your deductions this year will net you a better deal.

You May Also Like

Hot Definitions
  1. Fiduciary

    1. A person legally appointed and authorized to hold assets in trust for another person. The fiduciary manages the assets ...
  2. Expected Return

    The amount one would anticipate receiving on an investment that has various known or expected rates of return. For example, ...
  3. Carrying Value

    An accounting measure of value, where the value of an asset or a company is based on the figures in the company's balance ...
  4. Capital Account

    A national account that shows the net change in asset ownership for a nation. The capital account is the net result of public ...
  5. Brand Equity

    The value premium that a company realizes from a product with a recognizable name as compared to its generic equivalent. ...
Trading Center