What are 'Earning Assets'?

Earning assets are income-producing investments that are owned, or held, by a business, institution or individual. These assets also have a base value and the ability to produce additional funds beyond this inherent value for the investment holder. This allows the investment holder to maintain the assets as a source of earnings or sell the assets for a lump sum based on the inherent value.

BREAKING DOWN 'Earning Assets'

Earning assets include stocks, bonds, income from rental property, certificates of deposit (CDs) and other interest or dividend earning accounts or instruments. They can provide a steady income, which makes particularly useful for long-term goals such as retirement planning. Earning assets are a reflection of only part of the total assets of an individual or institution.

Maintenance on Earning Assets

Some earning assets, such as certificates of deposit, require no additional effort once the initial investment is made. Income is produced through interest or dividend payments and is a part of the essential design of the particular investment type. These investments require little to no maintenance and typically do not require any additional investment on the part of the investment holder.

Other earning assets, such as rental properties, require ongoing effort in terms of time and money. For example, rental property requires routine maintenance, property improvements, taxes, insurance and general management of the property. Some of these efforts can be effectively outsourced for a fee to a third party such as a property management firm.

Property management firms assume responsibility for the day-to-day operations associated with a rental property. This can include locating and screening potential tenants, managing any and all maintenance, collecting of rent payments, and advertising the property. The firm’s fees are typically paid through a portion of the rental income received. In cases where a property is vacant, management fees may be required directly from the owner.

Earning Assets and Tax Obligation

Income from earning assets must be reported in the appropriate tax filings. In the case of income generated by various securities, the investing institutions send yearly statements for tax reporting purposes that include the total amount of interest and/or dividends earned. Income from rental properties must also be declared.

Certain costs related to the maintenance of assets, such as rental properties, may qualify as tax deductions. This can include some routine costs, such as utilities and taxes, as well as certain variable costs, such as costs related to repairs made on the property.

RELATED TERMS
  1. Property Manager

    A property manager is the person in charge of the day-to-day ...
  2. Residential Rental Property

    Residential rental property is a type of investment property ...
  3. Real Estate Investment Group

    An organization that builds or buys a group of properties and ...
  4. Investment Property

    An investment property is a real estate property purchased with ...
  5. Property Tax

    Property tax is an ad valorem tax assessed on real estate by ...
  6. Personal Property

    Personal property is a type of property which can include any ...
Related Articles
  1. Investing

    Investing in Rental Property: What to Consider

    Investing in rental property has some unique issues which need to be considered.
  2. Investing

    Tips for prospective landlords

    Investing in rental property can generate serious income, but there's more to it than collecting rent. Check out all the pros and cons before you invest in the rental property.
  3. Taxes

    Tax Rules For Renting Out Your Vacation Home

    Here's a rundown of the specific tax rules that apply to homeowners renting out a vacation property.
  4. Retirement

    The Income Property: Your Late-In-Life Retirement Plan

    You're nearing retirement age and you don't have the nest egg you need. Here's how an income property can help you make up the shortfall.
  5. Financial Advisor

    How to Reduce Real Estate Investment Taxes

    Real estate tax law is not the same for rental properties as it is for residences. These tips can help you pay less in taxes.
  6. Taxes

    Sell Your Rental Property for a Profit

    Being a landlord can be taxing, especially when you want to sell. Find out how to reduce your burden.
  7. Investing

    5 Ways Rental Properties Jumpstart Your Finances

    Rental properties can help pay your mortgage, provide tax benefits and create retirement income.
  8. Investing

    4 ways to value a real estate property

    Here are several approaches to evaluate real estate properties for investment purposes.
  9. Taxes

    Tax Breaks for Second-Home Owners

    Owning a second home is a great investment for a variety of reasons, but you need to know the tax implications of multi-home ownership.
Hot Definitions
  1. Net Present Value - NPV

    Net Present Value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows ...
  2. Price-Earnings Ratio - P/E Ratio

    The Price-to-Earnings Ratio or P/E ratio is a ratio for valuing a company that measures its current share price relative ...
  3. Internal Rate of Return - IRR

    Internal Rate of Return (IRR) is a metric used in capital budgeting to estimate the profitability of potential investments.
  4. Limit Order

    An order placed with a brokerage to buy or sell a set number of shares at a specified price or better.
  5. Current Ratio

    The current ratio is a liquidity ratio that measures a company's ability to pay short-term and long-term obligations.
  6. Return on Investment (ROI)

    Return on Investment (ROI) is a performance measure used to evaluate the efficiency of an investment or compare the efficiency ...
Trading Center