Do you know what the single biggest threat to your financial well-being is? The answer is your own brain. They’re people who listened to the Unshakeable by Tony Robbins’ audiobook along with having read the book and they still might become victims to a form of financial self-sabotage. The thing is, for a lot of us, losing all our money and everything we own, especially in one shot, feels a lot like dying. That’s why 80% of success is psychology and the other 20% is mechanics.
The amount you have at risk in any activity is reduced by any losses allowed in previous years under the at-risk rules. It may also be reduced because of distributions you received from the activity, debts changed from recourse to nonrecourse, or the initiation of a stop loss or similar agreement. If the amount at risk is reduced below zero, your previously allowed losses are subject to recapture, as explained next.
No offense to the commenter, but you sound like a Complete_Newbie. You are correct that it takes hard work and patience to successfully invest and generate passive income, so do you really expect financial blog posts to provide you with specific deals or no-fail investment opportunities that you can jump on today? And if they do, they are likely just bait-and-switch sales schemes to induce you to pay for coaching or mentoring. You have to do your own leg-work and fact-finding and accept the level of risk that comes with the territory. Solid, free financial advice (like this blog) is pretty awesome and maybe you should take a look at your attitude when you wonder what is standing in the way of your passive income goals.
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“The biggest surprise is real estate being second to last on my Passive Income Ranking List because I’ve written that real estate is my favorite investment class to build wealth. Real estate doesn’t stack up well against the other passive income sources due to the lack of liquidity and constant maintenance of tenants and property. The returns can be huge due to rising rental income AND principal over time, much like dividend investing. If you are a “proactive passive income earner” like myself, then real estate is great.”
Why did P2P lending get a liquidity ranking of 6? It is quite possibly the most illiquid investment option you listed. You said you rank liquidity by “difficulty level of withdrawing your money without a massive penalty”, and for Lending Club notes, it’s not only difficult and extremely time consuming to sell all of your notes in their super illiquid market, but you would have to sell your notes at large losses to hope to get others interested in buying your notes. On top of that, it is impossible to withdraw your money any other way other than just waiting for interest/principal to pay off every month until maturity in 3 to 5 years. You can’t just one day tell Lending Club “I want to quit, please give me my money back.” One can even argue that it is less difficult to sell a home (in order to “withdraw” the money invested) than to withdraw all of their money from a P2P loan portfolio because it is very possible to sell a home before 3 to 5 years.
On the other hand my goals are to invest so I can continue to work a JOB as long as possible, but not depend on income from my JOB. I have some kind of sickness, I like to work and get huge satisfaction from contracting hvac. However I no longer need to work in the ghetto, or take on work to pay the bills, allowing me to pick and chose the projects I like to do.
The average period of customer use of the property is 7 days or less. You figure the average period of customer use by dividing the total number of days in all rental periods by the number of rentals during the tax year. If the activity involves renting more than one class of property, multiply the average period of customer use of each class by a fraction. The numerator of the fraction is the gross rental income from that class of property and the denominator is the activity's total gross rental income. The activity's average period of customer use will equal the sum of the amounts for each class.
This article is great, defining the differences and emphasizing the advantages of passive income. I believe it might be helpful to list some of the tax advantages of passive income vs active income as well. These include and are not limited to: cash-flow, being able to claim depreciation, deductable loan interest, tax free refinancing and deferred taxes on sale of property via 1031 exchanges. It’s the difference between 50% taxed income and potential tax free income.
Thanks for asking. https://passiveincomemd.com/what-is-passive-income/ gives a good summary of the definition I use. But in brief, it’s income that isn’t proportional to the time you physically put into acquiring it. It doesn’t mean it’s not without work or effort. It’s just that most of the work is done up front and it continues to pay off long after that initial effort. Real estate fits into that box. There’s definitely a spectrum but compared to what we do as doctors, where our compensation is directly linked to our time, most of these things are quite passive.
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4. Calculate how much passive income you need. It's important to have a passive-income goal — otherwise, it's very easy to lose motivation. A good goal is to try to generate enough passive income to cover basic living expenses such as food, shelter, transportation, and clothing. If your annual expense number is $30,000, divide that figure by your expected rate of return to see how much capital you need to save. Unfortunately, you've got to then multiply the capital amount by 1.25 to 1.5 to account for taxes.
Let’s say I am a parttime real estate investor with buy and hold rentals. I have a normal W-2 job but decided for educational purposes to take/pass the state real estate licensing exam. Now if I have an opportunity and want to work on nights/weekends as a real estate agent, does my passive rental income now get taxed (and much higher) as active income? Or does this come down to whether I work +\- 500 hours as an agent?
Great argument for passive income but want more meat on the bone on “passive income” information. We all feel screwed by the progressive tax system. Most of us probably think our dividends and cap gains are passive. True, but the real wealth, sans ceiling, resides within more risky ventures like entrepreneurship and real estate. While appealing, I’m too busy for all that at the level I need to be for success. It took me 2 years (starting with your blog) of reading financial books and blogs before I was ready to DIY invest. Several years, 2 kids and a slamming practice later, I just don’t have the time to read up on other passive avenues. Plus, I’m pretty content with my dividend and cap gains (while they last) and would rather see patients than take a call about a rental house. Maybe when the kids grow up a bit and I scale my practice back, your ideas will fall in more fertile soil. Until then, I look forward to future posts and comments.
Like many of the people, you probably think that you need a lot of money to get stated in the stock market, no it is not true. Of course, it is better if you have a nice amount of money to invest, but our goal here is to create passive income, we want our money to work for us. Unlike day trader, the stock market won’t be our primary financial activity; we will just try to create passive income sources.
As interest rates have been going down over the past 30 years, bond prices have continued to go up. With the 10-year yield (risk free rate) at roughly 2.55%, and the Fed Funds rate at 1.5% (two more 0.25% hikes are expected in 2018), it’s hard to see interest rates declining much further. That said, long term interest rates can stay low for a long time. Just look at Japanese interest rates, which are negative (inflation is higher than nominal interest rate).
The K-1 stated that the income was from a trade or business and included self-employment tax. Dr. Hardy's ownership interest in MBJ was not grouped with his medical practice activity, and the grouping regulations were not considered. In 2008, their CPA determined that the income from MBJ was passive and started to report it accordingly. He determined this because he learned that Dr. Hardy was not involved in any management of MBJ and was not liable for the debts of the company. He did not amend the 2006 and 2007 returns because he believed the difference was immaterial. In 2008 through 2010 the Hardy’s reported the MBJ income as passive and claimed an allowed loss.
Case Schiller only tracks price appreciation of RE. RE as rental investment vehicle is measured primarily on rental yield or cap rate or some other measure. Price appreciation in that scenario is only a secondary means of growth, and arguably should be ignored as a predictor of returns when deciding on whether or not to invest in rentals. More important key performance indicators for rentals are net operating income and cash ROI. Appreciation, if it occurs, is a bonus.
In the Tax Court Case of  Stephen P. Hardy, et ux. v. Commissioner, TC Memo 2017-16.  Dr. Stephen P. Hardy is a plastic surgeon who has specialized in pediatric reconstructive surgery since the early nineties. He conducted his medical practice through Northwest Plastic Surgery Associates, which is a single member PLLC. Mrs. Hardy is the chief operating officer. Previously, Dr. Hardy performed operations either at his office or at two local hospitals.
Take for example a situation where a CCPC earns rental income from its real estate properties which for this example qualifies as passive investment income and provides, at the same time, property management services that are characterized as active income. Under the current regime, a portion of the high corporate income tax paid by the corporation of 50% on its rental operations is accumulated in its RDTOH and will be refunded by the government only upon the payment of a dividend by the corporation to its individual shareholder. Given that an Eligible Dividend paid out of the property management services are taxed at a lower rate than would be a dividend paid out of the rental income, being a dividend that is not an Eligible Dividend, the company would decide to pay the Eligible Dividend and recover the RDTOH generated from its passive income. The profits generated from the rental operations could be paid to the shareholder the following year or two for example as a dividend that is not an Eligible Dividend, thus providing for a deferral of that additional 4% personal income tax.
This one may seem simple, but that’s only because it is. If you were to move your savings from a traditional, brick-and-mortar bank with a low-interest rate and into a high-yield savings account online, over time you can make a surprising amount of extra cash. Online banks are FDIC-insured just like the traditional brick-and-mortar institutions, so your money is just as safe.
As a general rule, the passive activity loss rules are applied at the individual level. Although Internal Revenue Code Section 469 was enacted to discourage abusive tax shelters, its impact extends far beyond shelters to virtually every business or rental activity whether reported on Schedules C, F, or E, as well as to flow through income and losses from partnerships, S- Corporations, and trusts. Generally, the law does not apply to regular C-Corporations although it does have limited application to closely held corporations.
In June, he put ads on his site with Google Adsense, and within the first hour, earned $1.08 with three clicks. He earned $5 the first day, $7 the second, and then eventually began pulling in $15-$30 a day. In October, he created an ebook exam study guide priced at $19.99. By month’s end, he earned $7,906.55 — more than he had ever previously earned in a month.
For those willing to take on the task of managing a property, real estate can be a powerful semi-passive income stream due to the combination of rental and principal value appreciation. But to generate passive income from real estate, you either have to rent out a room in your house, rent out your entire house and rent elsewhere (seems counterproductive), or buy a rental property. It’s important to realize that owning your primary residence means you are neutral the real estate market. Renting means you are short the real estate market, and only after buying two or more properties are you actually long real estate.
Flynn, who blogs at Smart Passive Income and discusses his secrets at the Smart Passive Income podcast, defines passive income as “building online businesses that take advantage of systems of automations that allow transactions, cash flow and growth without requiring a real-time presence. We don’t have to trade our time for money one to one. Instead, we invest our time upfront, creating valuable products and experiences for people, and we reap the benefits of that time invested later,” he says, adding, “It’s not easy. I just want to make sure that’s clear.”
I love travel photography. I spend a bunch of time on credit card churning and manufactured spending, which allows me to travel the world for virtually free. When I’m on the road, I take my camera with me to generate an additional form of passive income. Not only that I truly enjoy travel photography. It is a great hobby for me. Is hobby income passive or nonpassive income?
Some people take it automated well before the year is up. When it converts, it converts. If you target the right people and you're able to create the right message that appeals to your audience, you might just hit a home run. An automated webinar often involves the creation of a webinar funnel. That includes, not only the webinar, but also the email sequences, and possibly a self-liquidating offer, and maybe some done-for-your services and up-sells.
Dan Caplinger has been a contract writer for the Motley Fool since 2006. As the Fool's Director of Investment Planning, Dan oversees much of the personal-finance and investment-planning content published daily on Fool.com. With a background as an estate-planning attorney and independent financial consultant, Dan's articles are based on more than 20 years of experience from all angles of the financial world. Follow @DanCaplinger
No one should turn down wind farming’s ultimate passive income for the next 30 or more years … even 60 years when there is a positive cash flow on the sum total of all base payments when computing inflation for the next 60 years based on the previous 60 years, as long as the next era’s energy resource is not perfected (at which time they would not renew the option for the second 30 years).
One of the major premises of this blog is that a physician need not do anything special in order to reach financial independence and “live the good life.” She doesn’t need a side gig. She doesn’t need fancy investments. She doesn’t need a financial advisor. Simply living like a resident for 2-5 years after residency and then continuing to put 20% of your gross income into a reasonable, simple investing plan should enable any physician to meet all their reasonable financial goals and achieve financial freedom within the span of a typical career.
Some investments, such as certain notes, T-class units of mutual funds and REITs, pay a mixture of income and a return of capital. A return of capital is not included in income in the year received; rather, it reduces the adjusted cost base of the investment and increases the capital gain (or decreases the capital loss) on the future disposition of the investment.
  If you want nothing but the best, then amazon top 10 passive incomes is the one you should definitely consider, as it manages to bring a lot to the table. Amazon top 10 passive incomes is the epitome of what a great passive income should be. When it comes to searching a optimal passive income, the amazon top 10 passive incomes is definitely your first choice.

The reality of the situation is that this client doesn’t use a property management company on the rentals. I felt it was stretch to say she was a real estate professional, because she is a physician.  However, before she got her job with the clinic, she did some side work at a hospital for a few months, but never met the limits of material or active participation.  

For 2017, passive income that is taxed as ordinary income will be taxed in the 2017 tax brackets, and so the income tax rates range from 10 to 39.6 percent depending on your annual income. Long-term capital gains and qualified dividends are taxed at zero, 15 and 20 percent for 2017, but the brackets are different. So you can earn up to $37,950 in the 2017 tax year without paying taxes on these gains; if you earn between $37,950 and $418,400, the gains are taxed at 15 percent; and if you earn more than $418,400, your gains are taxed at 20 percent.

To quote Pat Flynn, a very successful passive income expert (he’s made millions), “We don’t have to trade our time for money one to one. Instead, we invest our time upfront, creating valuable products and experiences for people, and we reap the benefits of that time invested later,” he says, adding, “It’s not easy. I just want to make sure that’s clear.”
Have you developed a particular brand or system that others can benefit from?  The options here vary quite a bit.  For example the rock band Def Leppard is able to license their brand because of their massive success.  Or look at a college sports franchise like the UW Badgers, who have created an amazing brand around a great sports team (Go Badgers!), everything from t-shirts to coffee mugs.  All of these are potential sources of passive income, if you are the one that has created the brand or process of course!
In order to generate $10,000 in Net Operating Profit After Tax (NOPAT) through a rental property, you must own a $50,000 property with an unheard of 20% net rental yield, a $100,000 property with a rare 10% net rental yield, or a more realistic $200,000 property with a 5% net rental yield. When I say net rental yield, I’m talking about rental income minus all expenses, including a mortgage, operating expenses, insurance, and property taxes.
You need to decide which machines you want to run, get the necessary licenses to operate them (you're selling items so you need to get sales licenses and whatnot from your state), buy the machines and a truck for the items in the machines, find a supplier of the products, and then finally you can secure locations. Finally, you need to service them periodically or hire someone to service them.

I've now only got an SF rental condo and a Lake Tahoe vacation rental in my real-estate-rental portfolio. Although I miss my old house, I certainly don't miss paying $23,000 a year in property taxes and another mortgage, and dealing with leaks and managing terrible tenants. I drove by the other day and couldn't believe how much noisier and busier the street was than where I currently live. I wouldn't be comfortable raising my son there.

The at-risk rules limit your losses from most activities to your amount at risk in the activity. You treat any loss that’s disallowed because of the at-risk limits as a deduction from the same activity in the next tax year. If your losses from an at-risk activity are allowed, they’re subject to recapture in later years if your amount at risk is reduced below zero.
Blogging is still going to take work starting out. That path to $5,000 a month didn’t happen overnight but just like real estate development, it build up an asset that now creates constant cash flow whether I work or not. I get over 30,000 visitors a month from Google search rankings, rankings that will continue to send traffic even if I take a little time off.
The maximum special allowance of $25,000 ($12,500 for married individuals filing separate returns and living apart at all times during the year) is reduced by 50% of the amount of your modified adjusted gross income that’s more than $100,000 ($50,000 if you’re married filing separately). If your modified adjusted gross income is $150,000 or more ($75,000 or more if you’re married filing separately), you generally can’t use the special allowance. This is because the special allowance is reduced to $0 since the modified adjusted gross income is over the $100,000 amount.

If you don’t want to write the book yourself, you can also hire a ghostwriter through various online sites like Upwork, Freelancer.com etc. writing is the best passive income ideas for 2018. See my Kindle Direct Publishing Portfolio HERE. Selling your eBook can be a great way to earn passive income forever once it’s released. You need to take significant time to make sure it is high-quality. Also, you will need to spend time promoting your eBook.


Finding an outstanding development team is critical for success. Don’t just go for the lowest and cheapest price. You need a balance of budget and quality. From personal experience, I’ve had the best luck with developers from Romania. That is my number one pick. When you post a job on Upwork.com, everyone will be promising you world. Do not fall for a development team that does not have good feedback and return clients. Return clients are one of the most important. This means their client was willing to return to them for more work after their job finished! That says something.
I’ve never invested in real estate (except to live in), but am always intrigued by communities like FS who seem to have such a passion for it. My intrigue stems back to my earlier comments that the long term trends in appreciation in real estate are simply not very competitive versus equities, despite what Robert Kiyosaki had to say in his book, Rich Dad, Poor Dad.
That is a nice list of passive income sources. Actually, the most up-to-date list of dividend growth stocks is the list of dividend champions, maintained by Dave Fish. The list of dividend aristocrats is incomplete at best. For example, the dividend champions list has over 100 companies that have managed to increase dividends each year for at least 25 years in a row. The list of dividend aristocrats has no more than 50 – 60.
I do agree that a few of these ideas are not bad, but for me the problem with some of these platforms has been that I’m not from the USA. So, I can’t operate there. It’s a really interesting possibility to get some extra bucks from doing what you would do either way, like shopping. One of the best projects so far that I have seen is FluzFluz. It’s simple and really easy to use for everyone who uses Uber, Amazo, or other apps. The best part of all is that you can get some passive income – not just from your own purchases, but from other people’s as well. I hope one day it will make it here to your list. I think it’s worth it to check out.
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