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Finance Glossary

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Over 700 finance terms, Shmooped to perfection.

Ordinary Income

Definition:

Ordinary income refers to a tax rate which is applied to individuals' earnings. There are two primary tax rates in the United States: Capital Gains and Ordinary Income. Capital gains are applied to gains from investments and generally speaking, if they are held a year or longer, rates about half of the Ordinary Income rates are applied; if they are held less than a year, then Ordinary Income taxes are applied. At press time, the top ordinary income rate is about 36% and is applied to every dollar earned over about $380,000 for a married couple filing jointly.

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