What is 'Business Income'

Business income is any income realized as a result of business activity. Business income is a type of earned income and is classified as ordinary income for tax purposes.

BREAKING DOWN 'Business Income'

Business income can be offset by business expenses and business losses. It can be either positive or negative in any given year.

According to the Internal Revenue Service, business income may include income received from the sale of products or services. For example, fees received by a person from the regular practice of a profession are business income. Rents received by a person in the real estate business are business income. A business must include in income payments received in the form of property or services at the fair market value of the property or services.

The profit motive behind business income is universal to most business entities. However, how business income is taxed is treated differently for each of the most common business forms, sole proprietorships, partnerships, and corporations. As with any good tax advice; consult your tax advisor for specifics.

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