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What is Private Income?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 15 November 2016
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Private income is a term used to describe the income that is received by an individual or a household. One of the more common forms of this type of income is a salary or wages generated as the result of a job held by the individual or the working adults within a given household. Other types of revenue may also be considered private income, such as the dividends received by private investors or the interest earned on bonds purchased and held by individuals.

For many households, the generation of private income is essential to balancing the monthly budget. The amount of the income received during each calendar month can be used to manage necessary expenses like mortgage payments, utility costs, car loans, food, and other purchases that are considered important to maintaining a decent standard of living. The majority of individuals and households manage this process by securing and holding a job that provides payments for services rendered either in the form of a salary or an hourly wage. Employers issue payments to employees according to a schedule, with weekly, biweekly, and monthly being the typical options.

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A second example of private income is revenue that is generated as the results of investments. The investments in question may be assets acquired due to the direct efforts of the individual, or be contained in some type of trust established for the benefit of the recipient. In both instances, the individual receives periodic payments from those investments, with the amount often based on how well the holdings are performing in the marketplace. Should the returns on investments yield a sufficient amount to cover all household expenses, the recipient may find it necessary to hold down a job in order to generate income.

With private income, recipients are usually liable for calculating and paying income tax. In the case of working for pay, the employer usually withholds the taxes based on policies and procedures put in place by local and national tax agencies. For people who are self-employed, the responsibility for calculating, reporting, and submitting taxes rests with the individual taxpayer. In addition, individuals who receive private income from investments are often required to file and pay taxes on those funds, unless the structure of a trust fund requires an administrator to make tax payments to the appropriate agencies on behalf of the recipient. Even then, the recipient is normally responsible for filing annual returns that account for the funds received and the taxes paid through the trust arrangement.

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lighth0se33
Post 4

@OeKc05 – I was intimidated by having to withhold my own tax money when I first became self-employed, but it turned out not to be as bad as I had expected. After the first time doing my tax return, I felt I had it down.

Because I didn't make a whole lot of money, I could get away with only withholding 26% out of each check. I'm sure that may change as tax laws evolve, but it worked fine the first year.

I didn't have employees to pay or office expenses to deduct, so it was really simple. I'm sure that someone with major expenses who makes a lot more money would run into more hurdles than I did.

OeKc05
Post 3

I'm glad that my employer withholds taxes from my paychecks. If I had to do it myself, I wouldn't know where to start! I have to pay someone to do my taxes every spring, and I would have to hire someone to help me figure out how much to withhold if it were my responsibility.

feasting
Post 2

@giddion – I was able to make a second income from a work at home job. This was an ideal situation for me, because I could set my own hours and work around the job that provided my main income.

I found work doing some freelance writing and editing for a couple of different places. The writing could be done at any time of day, and the deadlines were several days away from the time I took each job. The editing job usually gave me a deadline of a few weeks.

I stayed pretty busy, but I managed to divide the work up so that I only had to work an hour on my freelance stuff each day, plus

a few hours on the weekend. I still had time for a social life, because I only worked from 9 in the morning until 4:30 in the afternoon at my regular job, which gave me plenty of time to get my other work done.
giddion
Post 1

I'm wondering how to make a second income. I already have private income from a job working 33 hours a week, but I really need more than that.

Since I only have a few hours a week to devote to another job, I'm wondering if it's even worth it. I need to find something that won't eat away all my free time but that can give me at least an extra $50 a week.

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