Taxes For Dummies

Chapter 6

Form 1040, Schedule 1, Part I: Additional Income

IN THIS CHAPTER

Discovering there’s more to income than just wages, interest and dividends

Finding out how to calculate income

Understanding the different types of income — active, passive, and capital gains

Figuring out foreign earned income and what to do about it

Calculating net operating losses and using them to reduce other years’ taxes

Oh, imagine how easy it would be if all income we earned was taxed in the same way. We’d just add all our bits and pieces together, apply the tax rate or table, and presto! We’d be done.

But that’s not the way of the U.S. income tax system and the rules that govern it. Instead, there’s a myriad of different types of income. Many of them, we cover in Chapter 5, such as wages, income from retirement accounts, capital gains, interest, and dividends. The rest of them, we cover here in Chapter 6. Some of these types of income will seem obscure, and you may wonder why we bother touching on ...