Passive income is money earned as a result of little effort and you can make money while you sleep, go on vacation, fall ill, or any other circumstance which would bar you from actively earning income.
In a word: yes. As with active (earned) income, passive income usually qualifies as taxable. However, passive income can receive different treatment from the IRS, as discussed more below.
How to Pay Less Under Passive Income Tax Rates (LT Capital Gains)
Purchase a dividend-paying stock through a free stock trading platform like Webull and hold on while the payments hit your brokerage account. And if you see the upper end of the 0% tax range shown above, you’ll see just how to pay zero tax on your income: make it passive!
Naturally, passive income comes from passive activities. Non-passive activities (otherwise called active) are businesses in which the taxpayer works on a regular, continuous and substantial basis.