What is constructive receipt of income?

Constructive receipt of income refers to the tax principle stating that income is considered received by a taxpayer when it is made available to them without any restrictions, even if actual possession has not occurred. This means that if a taxpayer has the right to control and access the income, it must be reported for tax purposes, regardless of whether the taxpayer physically received the funds.

In this context, if income is credited to the taxpayer’s account, or if they have the ability to draw on it at their discretion, it constitutes constructive receipt. This principle prevents taxpayers from deferring income simply by delaying its actual possession, ensuring that all earned income is reported within the appropriate tax year. Therefore, the key aspect of constructive receipt is the taxpayer's access to the funds or income without any barriers or limitations.