Tax Concepts

Passive Income

Passive income is income from activities treated as passive under the tax rules, often including certain rental or limited-participation activities.

Quick answer

Passive income is income from activities treated as passive under the tax rules, often including certain rental or limited-participation activities.

It matters because passive income and passive losses interact differently from active business or wage income.

A taxpayer may have passive rental income that can absorb suspended passive losses.

Free CPA Match

Need help applying this to your situation?

Answer a few quick questions and we will help you find CPA options that fit your location and needs.

Plain-English Definition

What Passive Income means

Passive income is income from activities treated as passive under the tax rules, often including certain rental or limited-participation activities.

Why it matters It matters because passive income and passive losses interact differently from active business or wage income.
Simple example A taxpayer may have passive rental income that can absorb suspended passive losses.
Related Questions

Questions people ask about Passive Income

What does Passive Income mean?

Passive income is income from activities treated as passive under the tax rules, often including certain rental or limited-participation activities.

Why does Passive Income matter?

It matters because passive income and passive losses interact differently from active business or wage income.

What is a simple example of Passive Income?

A taxpayer may have passive rental income that can absorb suspended passive losses.

When should I ask a CPA about Passive Income?

Ask a CPA when the term affects your tax bill, estimated payments, deductions, or a planning move before year end.

How is Passive Income different from Passive Activity Loss?

Passive Income means Passive income is income from activities treated as passive under the tax rules, often including certain rental or limited-participation activities. Passive Activity Loss means A passive activity loss is a loss from an activity treated as passive under tax rules, often meaning the loss cannot fully offset nonpassive income right away. The difference is that they apply to different tax, accounting, or business situations and should not be treated as interchangeable.

Free CPA Match

Get matched with a CPA near you

Answer a few quick questions and compare CPA options that fit your location and needs.