If the result is net income, don’t enter any of the income or losses from the activity or property on Form 8582 or its worksheets. Instead, enter income or losses on the form and schedules you normally use. However, see Significant Participation Passive Activities , later, if the activity is a significant participation passive activity and you also have a net loss from a different significant participation passive activity.
Net royalty income from intangible property held by a pass-through entity in which you own an interest may be treated as nonpassive royalty income. This applies if you acquired your interest in the pass-through entity after the partnership, S corporation, estate, or trust created the intangible property or performed substantial services or incurred substantial costs for developing or marketing the intangible property.
According to NOLO, “the home office deduction is available only if you are running a bona fide business.” That means any work dedicated to your passive income property from the confines of your own home can’t be a hobby. “If the IRS decides that you are indulging a hobby rather than trying to earn a profit, it won’t let you take the home office deduction.”

You don’t have to be a big corporate executive to need an assistant. Filing, emailing, scheduling and organizing the results of your moneymaking ventures takes time. And that's time you don’t want to waste while building your passive income empire. Nor do you want to expend any more time and money training and paying a new employee than you need to. Instead, consider hiring a virtual assistant.
Unfortunately, I can’t answer that conclusively one way or the other. It all depends on you, what you like to do, your work ethic, personality, etc. If you are a good writer perhaps you could write a book and make money that way. Or, you could start your own website and do affiliate marketing. Just because you are young it doesn’t mean you can’t make money doing at least a few of these ideas. I wish you luck in your money making efforts!
I just can’t seem to get my head around creating my own online product. When you talk about it, you make it sound like its mostly just about putting in the time and plugging away at it. Problem is I can never seem to come up with any ideas for a site or product that seem remotely unique or compelling or that I have any special knowledge about. The stuff I do know about is pretty commodity type knowledge that can mostly be found on thousands of sites on the internet already. Any tips on discovering what your “unique angle” is? I mean, you have a pretty compelling and somewhat unique personal story of working on wall street and then walking away at a young age.

If you like the “job” of wholesaling or flipping or landlording, or whatever it is you may be doing actively to earn income, rock on with it. Especially if you are using the income from that job to buy passive investments with, which is how one really becomes successful- find ways to fund buying passive investments that will lead you towards financial freedom. On that note too though, you can work any job or build a business to earn income that you can use to invest in passive investments. It doesn’t have to be flipping or wholesaling or landlording, albeit you do learn a lot about investing working those jobs, but it can be any job you want totally outside of real estate if you want it to be. Real estate is just a great way to earn some fat cash, which is why so many people stick with it. And if you do that, you are awesome still, as long as you realize you are working a job.


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.
Passive income, interest, taxable capital gains and certain rents as examples, earned by a CCPC is subject to a high corporate income tax rate of approximately 50%, a portion of which is accumulated in a notional account called the Refundable Dividend Tax On Hand (“RDTOH”). The RDTOH account is a mechanism that is used to simulate for the corporation the highest individual tax rate. In effect, the company “pre-pays” taxes to the federal government and is credited an amount in this pool. The CCPC is therefore entitled to a refund of its RDTOH of $38.33 for every $100 of dividend it pays to its shareholder, regardless of whether the dividend is sourced from the income it has generated from its active business or from its passive income. The refund is triggered at the time the dividend is paid since at this point the shareholder herself will now pay income taxes on that dividend earned. The RDTOH account is therefore used to achieve the integration at the corporate level by taxing passive investment income at roughly the top personal tax rate while it’s retained within the corporation.
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. Physical 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.
Indeed, the tax deferral was seen by the government as so valuable that it took legislative steps in the 2018 federal budget to substantially reduce it in some circumstances. Beginning in 2019, the SBD limit will be reduced based on the amount of “adjusted aggregate investment income” (AAII) the CCPC earned in the prior year. AAII is effectively passive investment income — think interest, dividends and capital gains — with a few adjustments.
In 2006, Dr. Hardy purchased a 12.5% interest membership in MBJ for $163,974. During the year following this purchase, the Hardy’s decided to build an office for Northwest Plastic Surgery next to MBJ. Dr. Hardy had no day-to-day responsibilities at MBJ, never managed it, and did not have any input about management decisions. He primarily performed surgeries on MBJ's patients on Mondays, and he did not pay rent to perform surgeries at MBJ. He received a distribution from MBJ regardless of whether he performed any surgeries at MBJ, and this distribution was not dependent on how many surgeries he performed. Physicians cannot refer their patients to the surgery center when they hold a financial interest. However, the patients often choose the surgery center because it was cheaper.
You don’t have to be a big corporate executive to need an assistant. Filing, emailing, scheduling and organizing the results of your moneymaking ventures takes time. And that's time you don’t want to waste while building your passive income empire. Nor do you want to expend any more time and money training and paying a new employee than you need to. Instead, consider hiring a virtual assistant.

Perhaps a coworker purposefully tries to make your life miserable because they resent your success. Maybe you get passed over for a promotion and a raise because you weren’t vocal enough about your abilities, and mistakenly thought you worked in a meritocracy. Or maybe you have a new boss who decides to clean house and hire her own people. Whatever the case may be, you will eventually tire.
This article dovetails nicely with your recent podcast “How to Get Rich Quick.” I would argue that you are not “inherently lazy.” My reasoning is that you are working at 1.5 FTE when you are F.I. I would confirm that once you have the real estate team in place, it is passive as you have suggested. The “work” with passive income comes at the beginning. Whether that be your book, website development, studying the real estate team, or learning finance. Lastly, I like Rockefeller’s quote on passive income. Perhaps you could add it to your quote bank. Here it is: “Do you know the only thing that gives me pleasure? It’s to see my dividends coming in.” There is no doubt, it is much easier to earn money on your money than work a job and earn money.
Jim Smith and Sharon Jones own JS Toys as 60-40 partners. Jim received $1,000 in interest income from the business because he lent the business money. Jim owns 60% of the business. Therefore, Jim can exclude $600 from his net investment income since that is his allocable share of non-passive income. The remaining $400 would be subjected to the Net Investment Income Tax calculation. Yes, we accountants love a stupidly convoluted tax code- keeps you confused or bored, and keeps us employed.
Portfolio income is income generated from selling an asset, and if you sell that asset for a higher price than what you paid for it originally, you will have a gain. Depending on the holding period of the asset, and other factors, that gain might be taxed at ordinary income tax rates or capital gains tax rates. Interest and dividends are other examples of portfolio income.

You’re personally liable for a mortgage, but you separately obtain insurance to compensate you for any payments you must actually make because of your personal liability. You’re considered at risk only to the extent of the uninsured portion of the personal liability to which you’re exposed. You can include in the amount you have at risk the amount of any premium which you paid from your personal assets for the insurance. However, if you obtain casualty insurance or insurance protecting yourself against tort liability, it doesn’t affect the amount you are otherwise considered to have at risk.
We have collected passive incomes from several brands including independently published, stephen tracey, 4 hour work day,4 hour work week kindle,passive income generation,passive income top 7 ways to make $500-$10k a month in 70 days, amazon and createspace independent publishing platform specific to your daily usage . Our selection of passive incomes has a minimum price of value $10.00 and a maximum price of value $15.38. Pick the one you want among the presented or you may blindly pick the first option.
Active Income Investments: Flipping and wholesaling. You have to do work in order to see money from these. You have to be hands-on. Note: I do still stand by my argument that wholesaling is not actually an investment at all, but for the sake of so many people thinking it is, I am including it. Another note: It is possible, if you are really slick and good, that you could be decently hands-off for a flip. But that is long down the road of being an advanced flipper so for now, I’m leaving it here.
Chase Credit Building Credit Card Churning Credit Cards Cryptocurrency Debt Reduction Dividend Growth Investing Dividend Income Portfolio Financial Independence Financing Free Freelancer Guest Interview Influencer Marketing Investing Manufactured Spending Millionaires Money Money Hacks Mortgage My 10 Year Plan My Travel Experiences Online Jobs without Investment Options Passive Income Personal Finance Powerpoint Presentation Quotes Real Estate Retirement Retirement Planning Review Rewards Robinhood Save Money Side Hustles Southwest Companion Pass Stocks Taxes Trading Travel Travel Hacking Travel Photography Wealth
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.

First, ask yourself if your app idea is feasible. Will it make money? This information is completely free and available on every single app store. Browse the “Top Grossing” section of any category. Check the rankings. These rankings show you the market demand. It’s not rocket science, but this isn’t the first step that most people take. Do you already see your app idea? Don’t be discouraged if you do. This is the best way to see and know if that idea is making money. If your app idea is ranked in the top grossing, even better. Do you see less than 5 version of that app idea? Then you have a good shot in this market!
If you are too risk-averse to engage in stock trading, there’s a much safer option to earn passive income, albeit with much lower margins of return: certificates of deposit or fixed deposits issued by banks. These financial vehicles are similar to mini investments. CDs work very similar to savings accounts with one notable difference. Once you place a deposit, it cannot be withdrawn until the certificate matures. You can obtain these certificates for lump sums of cash that you can allow to mature within time periods like 2 years or 5 years. The advantage of CDs is that they offer higher interest rates than regular savings accounts. You can rest assured that the money will be safe in the bank. A CD earns interest quarterly or annually and all you have to do is just sit back and wait for it to mature.

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).
I agree mostly with the real estate advice. I’m looking for ways to take advantage of the condo I own to get up the rent from ~$0.90/ft to the $1.2-1.5/ft that seems more like the range in the same area. I’d have to put in a bit of capital (probably 10k on the low end for just the basics up to 40k if I wanted to remodel the kitchen and 2 bathrooms up to par with the area), so the return is likely there if those upgrades warrant $1.30/ft (given the unit is larger than most 2br/2ba in the area).
​Self Publishing is mainstream today. When you purchase an eBook off of Amazon there’s a pretty good chance you’re buying a self-published book. Self-publishing is also ridiculously easy. I tried this a few years ago and couldn’t believe how simple the process was. To self-publish a book you’ll first need to write and edit it, create a cover, and then upload to a program such as Amazon’s Kindle Direct Publishing. Don’t expect instant success though. There will need to be a lot of upfront marketing before you can turn this into a passive income stream.

Self-rental situations are not just limited to buildings. You could lease your car to your S corporation. No, this isn’t the same as leasing a car from a dealership. This is where you own a piece of equipment, let’s say an automobile, and you lease it back to your business for your business’s use. Sounds exotic, but it is quite simple. More about this in a later chapter dedicated to fringe benefits and tax deductions.
This is why we can retire in our 40s. we currently have four streams of income (my salary, husband salary, husband pension and our passive portfolio income which is outside of all our employer retirement accounts). our passive portfolio income is surpassed what most people are aiming for their retirement portfolios. And we don’t sell anything…this is just our dividend income annually. Passive income is the key to flexibility. No employer necessary.

Once you start to see some success, don’t be led astray by the money. While Flynn does use affiliate marketing to make money, he only ever recommends products that he has personally used and likes. He is inundated by offers to earn $50 per sale through commission on products he has never even tried. “I’m like, ‘I don’t even know you, I don’t know what this product can do, and I don’t know if this product will help my audience.’ I only use products I’ve used before, because that trust you have with your audience is the most important thing in the world.” He says if you do recommend a product for the incredible commission but your audience has a bad experience with it, your credibility will be shot.
In February 2007, Pat Flynn was working at an architecture firm making $38,000 a year. He mulled boosting his earning power by getting an architecture license, but the process would likely take six to eight years. When he heard about getting a credential in sustainable design and environmentally friendly building called Leadership in Energy and Environmental Design (LEED), he decided to go for that, as no one in his department had it. The one problem? The exam was so challenging, just one-third of test-takers passed.
Real estate crowdfunding presents a middle-ground solution. Investors have their choice of equity or debt investments in both commercial and residential properties. Unlike a REIT, the investor gets the tax advantages of direct ownership, including the depreciation deduction without any of the added responsibilities that go along with owning a property.
MBJ is an LLC formed by a group of practicing physicians in 2004 for the purpose of operating a surgery center. For income tax purposes, it is treated as an LLC, and it hires its own employees. It bills patients directly for facility fees and then distributes each members' share to him or her based on his or her share of the earnings, which is the facility fees less expenses. It uses a third-party accounting firm to prepare the Schedule K-1, Partner's Share of Current Year Income, Deductions, Credits, and Other Items, and all other accounting matters for the members. MBJ does not pay members/managers for the procedures they perform.
You don’t have to be a big corporate executive to need an assistant. Filing, emailing, scheduling and organizing the results of your moneymaking ventures takes time. And that's time you don’t want to waste while building your passive income empire. Nor do you want to expend any more time and money training and paying a new employee than you need to. Instead, consider hiring a virtual assistant.
Great breakout of some common items that are (mostly) accessible to individuals. My biggest issue with p2p is the ordinary interest it generates and the ordinary tax that we have to pay. That really takes a bite out of the returns. Fortunately, I opened an IRA with one of the providers to juice the return with zero additional risk. 6-8% nominal returns over a long period of time will make me very happy. It should end up as 5-7% of the portfolio anyway, so nothing too significant.
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. Physical 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.
As you may have noticed, there is a common theme throughout all the ways the wealthy generate passive income.  All of them require you, in the beginning, to trade your time for money while building your passive income machine.  Eventually you will be able to leverage that time into exponential passive income while being able to work less and less.  The attitude being a willingness to take some risk, work hard, and create something of value.  If you put good in, you will get good out.  Wealthy people tend to choose this attitude more than others.
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.
With $200,000 a year in passive income, I would have enough income to provide for a family of up to four in San Francisco, given we bought a modest home in 2014. Now that we have a son, I'm happy to say that $200,000 indeed does seem like enough, especially if we can win the public-school lottery to avoid paying $20,000 to $50,000 a year in private-school tuition.

As a matter of background, Finance wanted to address the alleged tax loophole benefit of using a CCPC for retaining income to simply build investment portfolios not used in the business. To illustrate this benefit, let’s assume that Ms. Shareholder owns all the shares of a CCPC. That CCPC employs a large group to manage real estate property and earns $100 of what the tax law perceives as active income. The earnings for the corporation would be subject to a combined federal and Quebec income tax rate of 26.7% (assuming the small business deduction is not applicable in this instance). If in place of the CCPC, the same individual hired employees herself, the $100 of active income she would earn would be subject to a combined federal and Quebec personal top marginal rate of 53.53%. This difference in tax rates provides the corporation with approximately $26.83 of tax deferral than that earned by the individual.
The big difference in Real Estate is leverage which can be either good or bad depending on your timing and wiliness to stay long term and ride out the dips. Think about having one million dollars in single family California Real Estate in 2012, in November 2013 it’s now worth 30-50% more, timing is important but staying in the game long term is what it’s about.
Most people think about building a site to make money and passive income. But you actually can buy an existing website to make a passive income. I have many friends who don’t like to write and create content for their website, so they just pay people to do that for them. They only care about SEO, and they want it to be well ranked in Google. It’s entirely ok, but if you don’t want to be a website creator and entrepreneur, you can buy a website and manage it like a business.

All written content on this site is for information purposes only. Opinions expressed herein are solely those of AWM, unless otherwise specifically cited. Material presented is believed to be from reliable sources and no representations are made by our firm as to another parties’ informational accuracy or completeness. All information or ideas provided should be discussed in detail with an advisor, accountant or legal counsel prior to implementation.
×