3 SIMPLE STEPS
How To Get Passive Income
MAKING MONEY OUT OF NOTHING
What Is Passive Income?
Passive income is defined as earnings that require little to no effort from the person receiving them. In essence, it’s a form of residual income—not a second job. According to the Internal Revenue Services (IRS), passive income activities include:
“Rentals, including both equipment and rental real estate, regardless of the level of participation;”
“Businesses in which the taxpayer does not materially participate on a regular, continuous, and substantial basis.”
It should be noted that there is a major difference between passive and active income. The passive income refers to earnings from which the individual is not actively involved, while the active income is income from which services were performed—similar to a job.
Some active income examples include traditional employment or running a business. For real estate investors, their income is considered active if they are heavily involved in their projects, such as wholesaling. Some passive income ideas include interest income, stocks, and bonds. While many real estate investors favor passive income rental properties or investing in Real Estate Investment Trusts (REITs), they are not the only options available; there are several other ways to earn money.
Some of these activities may require a little bit of effort during the set-up phase, but the key difference between these active and passive activities is the amount of effort and involvement required. This is one of the key aspects of passive income.