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Finance Glossary

Just call us Bond. Amortized bond.

Over 700 finance terms, Shmooped to perfection.

Ordinary Income

Definition:

Ordinary income refers to the tax rate you get charged for your earnings and for investment gains on investments you've held for less than a year.

The tax rate for ordinary income is way higher (like almost twice as much) than it is for capital gains (profits you've gotten on investments you've held for a short period of time).

Moral of the story: Hold on to your investments for more than a year, or the government will consider it ordinary income and take more of it from you.