Passive Income

Money earned without effort or engagement. Examples include rental income, stock dividends and royalties. Passive income is defined by the IRS as money obtained from activities where you do not “materially participate” and is generally taxed at Ordinary Income Tax Rates, reported on Schedule E of Form 1040, and is not subject to self-employment tax, though it may be subject to the Net Investment Income Tax. See Earned Income

Glossary