Difference between Wealth and Income

Updated on June 27, 2017

Indicators of a person’s socioeconomic status, the terms “wealth” and “income” bear strong associations. But while they are often used interchangeably, there are significant differences between the two.

Definitions

Wealth

Wealth is the sum of all the tangible and intangible assets of a person, a company, a community, or a country. It is calculated by adding the market value of all assets and subtracting all existing debts from the total. In economics, individuals, companies, and countries that are capable of accumulating a wide range of resources are considered wealthy.

Income, on the other hand, is a fixed monetary return in exchange for goods and services or through investing capital. An income is expected at regular intervals and it is fundamental in fueling a person’s daily expenditures.

Wealth vs Income

So what’s the difference between wealth and income?

Wealth is the sum of all tangible and intangible assets acquired by a person, community, or country. Income is a fixed monetary return in exchange for goods and services or through an invested capital.

Income is earned by providing goods and services or investing capital into different types of financial assets such as real estate, bonds, and stocks. Wealth, by contrast, is accumulated over time.

In accounting, income is also known as a person’s net revenue. It is calculated by subtracting taxes and other expenses from gross revenue. Wealth, on the other hand, is computed by adding the market value of all assets and subtracting all existing debts and liabilities.

Income is acquired through different income streams and is accrued within a specific period of time. Wealth, by contrast, is accumulated over an extended period of time. It can also be generated from multiple sources of income.

While income is represented by a fixed amount of money, wealth encompasses all tangible and intangible assets. Aside from cash, it includes personal properties like real estate, cars, and jewelry.

Lastly, income tax is deducted from a person’s total income, while a wealth tax is imposed on an individual’s total market value. Also known as “net wealth tax” or “capital tax,” a wealth tax is subtracted from the value of personal assets like cash, bank deposits, insurance, money funds, and real estate properties.

Comparison Chart

WealthIncome
The sum of all tangible and intangible assets acquired by a person, community, or countryA fixed monetary return in exchange for goods and services or through an invested capital

Accumulated over time

Earned by providing goods and services or investing capital into financial assets such as real estate, bonds, and stocks

Calculated by adding the market value of all assets and subtracting existing debts and liabilities

Calculated by subtracting taxes and other expenses from the gross revenue

Accumulated over an extended period of time

Accrued within a specific period of time
Includes all tangible and intangible assetsRepresented by a fixed amount of money
Deduction: wealth taxDeduction: income tax