Business Income vs. Nonbusiness Income

Business income is all income arising from transactions and activities in the course of a taxpayer's regular trade or business. Some income from tangible and intangible property is also included as business income if the acquisition, use, management, or disposition of the property makes up an integral part of the taxpayer's business operations.

A taxpayer may have more than one regular trade or business to consider when determining whether income is business or nonbusiness income. In short, income arising from trade or business operations is business income. Any other income is nonbusiness income, and the taxpayer must have clear evidence showing that such earnings are classifiable as nonbusiness income.

There are no specific types of income that are always classified as "business income" or "nonbusiness income," as these classifications depend on what type of trade or business you are in. For example, rental income is a fairly common type of nonbusiness income. However, if you are in the business of renting personal property, then rental income would be considered business income.

Related Links