A quick guide to categorizing money that flows into your accounts so your plan is accurate—and not inflated.
Think of income as new money entering your world—cash that’s free to spend, save, or assign to goals. It’s different from money that simply moves between your own accounts or refunds that put dollars back where they started.
Use these as income in your budget
- W-2 wages and salary (your paycheck as an employee)
- 1099 / freelance / contractor pay (nonemployee compensation)
- Tips, commissions, and bonuses
- Rental income
- Dividends and interest from investments and savings
- Government benefits (for example, Social Security)
Common inflows that are not income
- Transfers between your own accounts (checking ↔ savings, Venmo to self, etc.)
- Credit card refunds or merchant returns (they reverse prior spending)
- Employer expense reimbursements (they repay you for business costs)
- Loan proceeds (personal, student, home equity)—that’s debt, not income
- Gift cards or points redemptions (not cash earnings)
Avoid double counting. If part of your paycheck goes straight to retirement pre-tax, it won’t hit your bank—but it is part of your savings picture.
Track those contributions in your overview. For your monthly spending plan, base numbers on the net pay that actually arrives.
Further reading
- IRS: About Form W-2 (Wage and Tax Statement)
- IRS: About Form 1099-NEC (Nonemployee Compensation)
- IRS Publication 525: Taxable and Nontaxable Income (loans vs. income, other categories)
- IRS Topic No. 431: Canceled debt—when forgiven debt becomes taxable income
- Investor.gov: Dividends and key dates
- Social Security Administration: Benefits overview
- CFPB: How to create a budget and stick with it