Business Income

Income earned by a business differs from the amount of business earnings which are taxable (accounting income vs. business income). A tax accountant would sort out what income was earned through normal business cycles, in addition to income earned through property and on capital.


There is also the distinction to be made between business income and employment income. That is because a business has many more options to made deductions to their earnings before deriving their taxable income.


Interest, dividends, royalties and rent may be included in the amount of revenue earned on property. Interest would be included if the business itself normally made profits on rent of property. The income would be classified as business income rather than property income, if the business engaged in rents as its main way to make earnings. A further indicator of the existence of business income would be had, if other ancilliary services were added to the regular upkeep of the properties.


For tax purposes, business income differs from capital income, since they may be taxed differently, and losses applied not in the same way. Business losses may be used against other types of losses, while capital losses may be applied only to capital gains.  Special rules also follow for how far back or into the future losses may be carried.


Determination if income is derived through income or capital include the following:


  • nature of the transaction
  • frequency of the transaction
  • period of ownership
  • intent of the transaction (primary & secondary as they relate to the owner´s business)