Passive Income

Passive Income

Earnings an individual derives from a rental property, limited partnership, or other enterprise in which he or she is not actively involved.

Notes:

There are three main categories of income: active income, passive income, and portfolio income. Passive income does not include earnings from wages or active business participation, nor does it include income from dividends, interest, or capital gains. For tax purposes, it is important to note that losses in passive income generally cannot offset active or portfolio income.

See also: Active Income, Capital Gain, Dividend, Interest, Limited Partnership, Passive Loss, Portfolio Income, Unearned Income

---

Passive income

Income (such as investment income) that does not come from active participation in a business. Specified by the U.S. tax code.