Legal Definitions - personal income

Personal income refers to the total amount of money and other forms of value an individual receives from all sources before any deductions, such as taxes or social security contributions, are taken out. It encompasses earnings from employment, profits from a business, income from investments, and various government benefits.

Here are some examples illustrating personal income:

• Example 1: A Salaried Professional

  Scenario: Alex works as a software engineer and receives a gross salary of $120,000 per year. Additionally, he earns $500 in interest from his savings account and $1,500 in dividends from a stock portfolio over the same year.

  Explanation: Alex's personal income for the year would be the sum of his gross salary ($120,000), the interest from his savings ($500), and the dividends from his stocks ($1,500). This total of $122,000 represents all the money he received from all sources before any taxes, health insurance premiums, or retirement contributions were deducted.

• Example 2: A Small Business Owner

  Scenario: Brenda owns a successful bakery. In a given year, the bakery generates $75,000 in net profit that she takes as owner's draw. She also rents out a spare room in her house, earning $6,000 annually, and receives $2,000 from a freelance consulting project she completed.

  Explanation: Brenda's personal income includes the $75,000 in profits from her bakery, the $6,000 in rental income, and the $2,000 from her consulting project. Her total personal income of $83,000 reflects all the financial resources she acquired from her business, property, and services before any personal taxes or other obligations are considered.

• Example 3: A Retiree with Multiple Income Streams

  Scenario: Charles is retired and receives $25,000 annually from his pension, $18,000 from Social Security benefits, and $7,000 from the interest and dividends generated by his retirement investment accounts.

  Explanation: Charles's personal income is the combined total of his pension ($25,000), Social Security benefits ($18,000), and investment income ($7,000). His total personal income of $50,000 represents all the money he receives to support himself, regardless of its source, before any income taxes are applied to these various streams.