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Income is the consumption and saving opportunity gained by an entity within a specified timeframe, which is generally expressed in monetary terms.[1] Income is difficult to define conceptually and the definition may be different across fields.[2][page needed] For example, a person's income in an economic sense may be different from their income as defined by law.[2]
An extremely important definition of income is Haig–Simons income, which defines income as Consumption + Change in net worth and is widely used in economics.[2]
For households and individuals in the United States, income is defined by tax law as a sum that includes any wage, salary, profit, interest payment, rent, or other form of earnings received in a calendar year.[3] Discretionary income is often defined as gross income minus taxes and other deductions (e.g., mandatory pension contributions), and is widely used as a basis to compare the welfare of taxpayers.
In the field of public economics, the concept may comprise the accumulation of both monetary and non-monetary consumption ability, with the former (monetary) being used as a proxy for total income.
For a firm, gross income can be defined as sum of all revenue minus the cost of goods sold. Net income nets out expenses: net income equals revenue minus cost of goods sold, expenses, depreciation, interest, and taxes.[1]
- ^ a b Barr, N. (2004). Problems and definition of measurement. In Economics of the welfare state. New York: Oxford University Press. pp. 121–124
- ^ a b c McCaffery, Edward (2012). The Oxford Introductions to U.S. Law: Income Tax Law 1st Edition. Oxford University Press.
- ^ Case, K. & Fair, R. (2007). Principles of Economics. Upper Saddle River, NJ: Pearson Education. p. 54.