Private income is a term used to describe the income that is received by an individual or a household. One of the more common forms of this type of income is a salary or wages generated as the result of a job held by the individual or the working adults within a given household. Other types of revenue may also be considered private income, such as the dividends received by private investors or the interest earned on bonds purchased and held by individuals.
For many households, the generation of private income is essential to balancing the monthly budget. The amount of the income received during each calendar month can be used to manage necessary expenses like mortgage payments, utility costs, car loans, food, and other purchases that are considered important to maintaining a decent standard of living. The majority of individuals and households manage this process by securing and holding a job that provides payments for services rendered either in the form of a salary or an hourly wage. Employers issue payments to employees according to a schedule, with weekly, biweekly, and monthly being the typical options.
A second example of private income is revenue that is generated as the results of investments. The investments in question may be assets acquired due to the direct efforts of the individual, or be contained in some type of trust established for the benefit of the recipient. In both instances, the individual receives periodic payments from those investments, with the amount often based on how well the holdings are performing in the marketplace. Should the returns on investments yield a sufficient amount to cover all household expenses, the recipient may find it necessary to hold down a job in order to generate income.
With private income, recipients are usually liable for calculating and paying income tax. In the case of working for pay, the employer usually withholds the taxes based on policies and procedures put in place by local and national tax agencies. For people who are self-employed, the responsibility for calculating, reporting, and submitting taxes rests with the individual taxpayer. In addition, individuals who receive private income from investments are often required to file and pay taxes on those funds, unless the structure of a trust fund requires an administrator to make tax payments to the appropriate agencies on behalf of the recipient. Even then, the recipient is normally responsible for filing annual returns that account for the funds received and the taxes paid through the trust arrangement.
