phantom income

Definition

Income that you have to pay taxes on despite never actually receiving the cash, which is as frustrating as it sounds. Common with certain bonds, partnerships, and investment structures designed by people who hate you.

Example Usage

Thanks to phantom income from the REIT, I owe taxes on money I never saw and don't have, so that's going well.

Origin

Tax accounting terminology that emerged with complex securities in the 1970s-80s

Fun Fact

Zero-coupon bonds are phantom income factories—they pay no interest until maturity, but the IRS wants its cut every year anyway.

Source: Tax accounting and investment terminology

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