The term investment income is a basic term. It defines any type of income that is derived from specific investments. Generally, it is used to describe the profit that is made from a portfolio of invested assets. This type of income must be reported on all federal, state and local income tax filings, and it is likely to be taxed as standard income either for the business or for the individual who owns it. The government taxes income based on the value of that income. With investment income, the value of that income is added to any other income, which then determines the actual tax bracket that the individual or business fits into, which yields the tax rate charged.