lipS, p ,'I1 , ]OI1 iIl LOll1c', ,lilt! :ll i IlH l n~ ., ,-t1\. ~ IIl,OI1l':]s l\1 ;"] d . li p ot I I1L () m ~ .

lllltd
on thL' joh .1 ;; well ;1' 1l10,t oth.:r tonll S ot 1I(}llIllI"o tlll(,1: 1 II]LOI1l':.
2. Purt folio ill .""TlC , L()lI1pns in ~ r.:.lrnill,l\s gl'IlLT;ttL'd 'r o lll v;nious l)'p~
' If
inv(: 'f n1l"1lI 11OIJing.. T ill'> L ;H ~ g on' (J I inUlIllL' cowrs 111O, t (h i! nut a\1) I
o r 11l\'o Ull L'IlI " 11'0/11 <a ving' al'dllllllS, , lock s, bond s, .1Ild Illulua l fu n I
t"
opli uns and fu tures. Fur th L' Ill Q Sl p .1I" [, porrioli o illCOlllL' consists o f Il1 k t.
Ji\' idL'l1 cls , ~ l1d C.J pil<11 oJ.ins ([h.: profi r u n thL ~ " lc of .111 in\'L'stmenr ).
CIfIII.A ~
3. P ;l ssil.'C i n co me, (j ~pec i;1 1
c n r.:go ry uf illc'nnw Lomposed chiefly of Ill ' Ill.:.
dcri vtd irn m real e 'tatL', li mited partnerships, ;lO d Iltha f(j nn ~ of t ;l -ad In
-:-;:.
:'-PI'C
ta ge J inves t l11e n h .
T hl: ke y feature o f rhese categori es is rhar rhe. limit rh :1I110Unr o f d J
riOlb (wrire-offs ) rhar La ll he rnken, parrinJlJrl y with rL'gMd to pon to l!o .j
pass!\' income. Specificall y, tht: amollnt of allowah le ded ucrio n J ,S OCI . J
wi rh p )rr foli ) and pa~~i\"(' income is limil ed 10 the ,1I170lInl of iI/ come deft/ 'I'd
(rulll tln'_ ' two SOllrccs. For example, if you had a tota l oi $ .18 0 ill pon ll,l,o
inL'f)]llt" for th e year, yo u L'o lllJ dedll.-r no more rhan 380 in inVC S[flllllt­
rdared inreresr expl:nse. 1·or ded ucrioll purposcs. the port fo lio .1I1J pa ' t
income caregories CJnnot he mi x d or Lomhinecl with each orhn or II·j th a Ill·t
inL'ome. 11i /!{'stmclll-relatcd expenses alii be IIsed fI llly t o o/isc( (l ort! 1(;
/II U ) IIU ' , and Iwith a f{,w excepri ons ) p assw e 1II!·'cs tm enl exlJenses c.m be ' 'd
o nly to ()Ifst'i the in u Jll IIJ (rom p a ssir't' i ll v(' st ml'l1/s.

S, f\LJL Ordinary Income Regardl ess of

herh er it's cl ass ifi ed , s anil'c" pontol '1,
I

I '1~lp Of pa ssI ve , ordi nary incoUie--afrer certai n co mputariol1s- 1\ raxed r Of" IIf
fi\'f' ra r ,,: 15 , 28, 31, 36, c r 39.()% . T here is oll e srructure of rax ratt'$ ior t , , ­
pa 'pr s who file i ndiI)idlwl rerurn s nd ,morher for rh o~e who fil e 10 111/ n.'rlll )
wirh J sPQUl>e. Ta ble 3. 1 hows rhe rax rat S and income bracket. f r till' S f \ 0
filing ca r ' rie:.. Nor ' rhar the fares are /}Tl"J r:, r essi1 'c ; til ), (I I' r~ with r.a xallc
inc )'m an l\" a specified amount ar ta xed a; higher ra te.'
An . amp le will demoll '> t r ho w t rdinary inl ome is raxed. Consid r H
Elli si rers, Jo nl and ara. B th :l f ingl, Joni 's ra xahk' illcome i_ $ 1 ",(1 "
' 6,0 O. U ' ing T a ble .1 , we e lfl c;lkulate their ta xe., a\ fo il ) 1\''> :
JOlli :

(0. 1- X 5 18,000) ='- ~2 . 70 n

. ra:

( . 1: X 24, : 0)
)\

Th e pI' gre i, e na ture o f the feJ era I i fK ( Ill e tel )( . rruc ru rc CJ n bt Cell hy II
fa u rl" r alth' lugh .a ra '. raxa ble illL'Ollle i o nl\' m'il rhar of Joni, her inL I
r;1 i. l1lurc> rhan 2.5 lime .Io ni" ,