What is capital income?

Capital income is income generated by an asset over time, rather than from work done using the asset, according to Investopedia. If a farmer buys land for a certain amount of money and sells it at a profit after one year, the difference in the prices is capital income.

Capital income, also known as capital gains, can only be realized after an asset is sold, according to Investopedia. In contrast, if an asset is sold at a lower price than it was bought for, the result is a capital loss. In the United States, tax exemptions exist on assets such as common stock holdings to encourage investment, according to the IRS.