Let’s take a look at a smaller and more niche category for the sake of our discussion. We’ll look at “Food & Drink” on the iOS app store. Less big companies and less noise in these smaller categories. You can see the top grossing app is eMeals. A meal planning and grocery shopping list app. Number 5 is another meal planning app. Even has the same green icon. See a trend here? You’ll also see that 16 out of the top 24 grossing apps are “freemium” apps. Meaning, their business model is to give an app away for free and up-sell upgrades.
​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.

Earlier this year, the government passed new tax legislation governing Canadian-controlled private corporations (CCPCs), including incorporated professionals. As we enter the final weeks of 2018, one new measure is of particular concern — the potential looming loss of the small business deduction (SBD) in 2019 for corporations with more than $50,000 of passive investment income in 2018.

Those who meet the IRS' definition of a real estate professional have their real estate investments treated as active income. To meet this definition, you must spend at least 750 hours per year working in the real estate industry. Paid employees who own at least 5 percent of a real estate business also are considered a professional. If you are a full-time developer for your own account or a full-time real estate agent paid only on commission, you are a real estate professional. In these two instances, you can use losses from your investments to offset income you make in other real estate business activities.
However, this comes back to the old discussion of pain versus pleasure. We will always do more to avoid pain than we will to gain pleasure. When our backs are against the wall, we act. When they're not, we relax. The truth is that the pain-versus-pleasure paradigm only operates in the short term. We'll only avoid pain in the here and now. Often not in the long term.
Your car: Transportation can be a hot commodity on campus, and many students will pay for it. If the idea of handing over your keys makes you squeamish, look for ways to get paid as a chauffeur. A girl in my college dorm made extra cash by charging $5 to tag along when she went to the grocery store. And when I drove out of town for long weekends, I often would cover my gas costs and then some by offering rides.
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.
Real estate investments generally are considered passive income – unlike income from a job, which is considered active – because revenue is generated from the money you invested rather than from the work that you do. You have to pay taxes on your income regardless of whether it's active or passive. Money earned from real estate investing is reported on the Schedule E form and gets carried forward to line 17 of your 1040 tax return. It's then included with your other income and is subject to regular taxes.
Not bad to have some extra income! Also, when I’m traveling I rent out my entire place. I love generating income for not being home!  It doesn’t get much better than Airbnb as a form of passive income. It literally only takes 10-15 minutes to set up and you can generate rental income from your property with the click of a button. Pair this with credit card churning to travel and you are making more money than you are spending. Talk about getting paid to travel! Put your extra space to work on Airbnb!
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 have a small amount of money and you want to create passive income, but you don’t know anything about investment, try to read some blogs about the stock market. Do not go to a financial advisor, they will take you a lot of money, and if you don’t want to invest 100k, it’s better to try that by yourself. You can read Rich Dad Poor Dad to get a necessary explication about the financial world.
When money is lent to a partnership or S-corporation acting as a pass-through entity (essentially a business that is designed to reduce the effects of double taxation) by that entity’s owner, the interest income on that loan to the portfolio income can qualify as passive income. As the IRS language reads: "Certain self-charged interest income or deductions may be treated as passive activity gross income or passive activity deductions if the loan proceeds are used in a passive activity."

The government’s concern with the accumulation of passive income-generating investments in private companies stems from the fact that CCPCs pay a blended federal and provincial small business tax rate of 13.5% (in Ontario) on active business income up to the small business deduction (SBD) limit of $500,000 in 2018. This compares favorably to the tax rates on income earned by individuals. On a combined federal and provincial basis, the differential between the highest marginal tax rate on personal income and the small business tax rate ranges between about 36% and 41%, depending on the province in which a CCPC resides.

The Tax Court had to decide whether the Hardy’s properly reported Dr. Hardy's income from MBJ as passive, and if so, whether they could deduct a passive activity loss carryover from previous years. It also had to determine whether the Hardy’s overpaid their self-employment tax. Finally, it had to decide if they were liable for the accuracy-related penalties.


Secondly – and this is just quibbling – I’d change that risk score. The risk of private equity is incredibly high and should be considerably riskier than bonds! You are providing a typically very large amount of capital to one business that you agree to have no control over, and the success or failure of that business over a locked, predefined term determines your return. And in the few deals I’ve negotiated for clients, my experience has been that there are often management fees, performance fees, etc. that may cut into your potential gains, anyway. You’re putting a lot of eggs in one basket, and promising an omelet or two to the management no matter what. You really need to be confident that you found the next Uber before you take this giant risk!
Passive income is earnings derived from a rental property, limited partnership or other enterprise in which a person is not actively involved. As with active income, passive income is usually taxable. However, it is often treated differently by the Internal Revenue Service (IRS). Portfolio income is considered passive income by some analysts, so dividends and interest would therefore be considered passive.
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.
Grouping is important for a number of reasons. If you group two activities into one larger activity, you need only show material participation in the activity as a whole. But if the two activities are separate, you must show material participation in each one. On the other hand, if you group two activities into one larger activity and you dispose of one of the two, then you have disposed of only part of your entire interest in the activity. But if the two activities are separate and you dispose of one of them, then you have disposed of your entire interest in that activity.
Virtual assistants can do anything that doesn’t require a physical presence: Scheduling appointments, making calls, sending emails, creating and processing invoices and general project management can all be done virtually. And tasks beyond administrative work are possible, too: Virtual assistants can be trained for customer prospecting and other key business operations. In short, it’s worth learning how to use their talents to your benefit.

For those of you who don’t want to come up with a $220,000 downpayment and a $900,000 mortgage to buy the median home in SF or NYC, who don’t want to deal with tenants or remodeling, and who wants to not do any work after the investment is made, check out Fundrise. They are my favorite real estate crowdsourcing company founded in 2012 and based in Washington DC. They are pioneers in the eREIT product offering and they’re raising an Opportunity Fund to take advantage of new tax favorable laws.

Earlier this year, the government passed new tax legislation governing Canadian-controlled private corporations (CCPCs), including incorporated professionals. As we enter the final weeks of 2018, one new measure is of particular concern — the potential looming loss of the small business deduction (SBD) in 2019 for corporations with more than $50,000 of passive investment income in 2018.

The new rules may not impact you much unless you have a sizeable passive investment portfolio in your corporation. Keep in mind that a $1 million corporate investment portfolio which  generates a 7% rate of return will generate $70,000 of return, but not all of that return may be taxable as a portion could be attributable to unrealized appreciation from stocks, for example.

In theory, and keeping it at the highest most basic level, financial freedom means you have to do no work in order to receive income. So once you are financially free, you no longer have to worry about money. What does that look like to you? Maybe you are like me and plan to do a lot of traveling, take up new hobbies, take random college courses to learn new things (for fun, not because I have to), spend epic amounts of time snowboarding and playing in the woods, and as always, sleeping in. Or maybe you are the polar opposite and plan to wake up early and hang out on your couch all day and watch TV.
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The average period of customer use of the property, as figured in (1) above, is 30 days or less and you provide significant personal services with the rentals. Significant personal services include only services performed by individuals. To determine if personal services are significant, all relevant facts and circumstances are taken into consideration, including the frequency of the services, the type and amount of labor required to perform the services, and the value of the services relative to the amount charged for use of the property. Significant personal services don’t include the following.


This is certainly not in my wheelhouse, but time and again people have been able to make a lot of money from creating and selling an app.  You can offer the app for free to users, and if enough people use it you can then charge for businesses to advertise (just like #5) with you.  You can also offer a version of the app that has no advertisements, but the user must pay a nominal fee to have this version.  Either way once you have created the app and it is in the marketplace, it has a ton of potential to generate passive income.  Depending on the app, you could also be bought out by a larger company and given a lump sum to walk away.  This happened to Garret & Jessica Gee.  Garret developed an app that was eventually sold to Snapchat for $54 Million!

Those who don't meet this test can qualify for a limited $25,000 allowance for losses if they qualify as an active participant. Active participation requires only limited activities, such as approving new tenants, setting rental terms, and approving payouts. If you qualify, you can then take up to that limited amount of loss each year, carrying over any excess losses until you generate rental income to offset it.
Nonpassive: Businesses in which the taxpayer materially participates. Also, salaries, guaranteed payments, 1099 commission income and portfolio or investment income are deemed to be nonpassive. Portfolio income includes interest income, dividends, royalties, gains and losses on stocks, pensions, lottery winnings, and any other property held for investment

But two months later, with the economy slowing down after the financial crisis, his firm began laying people off, and Flynn was informed that after his current projects were finished, he also would be out of a job. At the same time, he couldn’t help but notice that in the LEED exam forums he had frequented, people were referring to him as an expert and directing questions his way. He began to think he might capitalize on that.


In fact, as I laid in bed one morning coming up with this post, I could really only think of one aspect of passive income that is worse than earned income. If you are a high earner, you can’t deduct real estate losses against your earned income unless you qualify as a “real estate professional,” which basically means you spend > 750 hours a year doing it. That’s it. The rest of the time, passive beats active.

If your modified adjusted gross income (MAGI) is $100,000 or less ($50,000 or less if married filing separately), you can deduct your loss up to the amount specified above. If your MAGI is more than $100,000 (more than $50,000 if married filing separately), your special allowance is limited to 50% of the difference between $150,000 ($75,000 if married filing separately) and your MAGI.


There was a time when CDs would produce a respectable 4%+ yield. Nowadays, you’ll be lucky to find a 5-7 year CD that provides anything above 2.5% The great thing about CDs is that there are no income or net worth minimums to invest, unlike many alternative investments, which require investors to be accredited. Anybody can go to their local bank and open up a CD of their desired duration. Furthermore, a CD is FDIC insured for up to $250,000 per individual, and $500,000 per joint account.
Passive income differs from active income which is defined as any earned income including all the taxable income and wages the earner get from working. Linear active income refers to one constantly needed to stay active to maintain the stream of income, and once an individual chooses to stop working the income will also stop, examples of active income include wages, self-employment income, martial participation in s corp, partnership.[4] portfolio income is derived from investments and includes capital gains, interest, dividends, and royalties.[5]

Social Security retirement benefits may or may not be taxable depending on your annual income. If your annual income is more than $34,000 as a single taxpayer or $44,000 as a joint filer, up to 85 percent of your Social Security may be included in your ordinary income and taxed at your normal income tax rate. If your income is under $25,000 as a single taxpayer or $32,000 as a joint filer, you don't pay tax on Social Security benefits. If your income is between $25,000 and $34,000 as a single filer or $32,000 and $44,000 as a joint filer, up to 50 percent of your benefits are taxable.

The Tax Court had to decide whether the Hardy’s properly reported Dr. Hardy's income from MBJ as passive, and if so, whether they could deduct a passive activity loss carryover from previous years. It also had to determine whether the Hardy’s overpaid their self-employment tax. Finally, it had to decide if they were liable for the accuracy-related penalties.
Peer-to-Peer Lending: Earn up to 10% in returns by lending individuals, organizations and small companies who don't qualify for traditional financing through peer-to-peer lending platforms like Lending Club. You can lend $100, $1,000, or more to borrowers who meet lending platform financial standards. Like a bank, you'll earn interest on the loan - often at higher returns than banks usually get.
In 2012, even I wrote a 150-page eBook about severance package negotiations that still regularly sells about ~35 copies a month at $85 each (2nd edition for 2017) without any effort. In order to generate $2,975 a month or $35,700 a year in passive income as I do now, I would need to invest $892,500 in something that generates a 4% yield! To earn $10,000 a year in passive income would therefore need roughly $250,000 in capital.
Build an investment portfolio that pays out dividends (Stocks / Bonds / Mutual Funds). Dividends are payouts that companies give to their investors as a portion of their earnings. They’re often paid out quarterly. If you’ve already got an investment portfolio, it’s time to take a good look at which stocks, bonds, or mutual funds you own. You’ll see consistent returns from the ones that pay dividends. This is a fantastic way to earn passive income. Invest once and watch the returns pile up.
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.
Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.
In determining whether qualified nonrecourse financing is secured only by real property used in the activity of holding real property, disregard property that’s incidental to the activity of holding real property. Also disregard other property if the total gross fair market value of that property is less than 10% of the total gross fair market value of all the property securing the financing.
Next, make sure to know the difference between “Top Grossing” and “Top Paid”. They are both very different rankings. “Top Grossing” is what you use to study what is making the most money. “Top Paid” is more so for trending. More downloads doesn’t necessarily mean more revenue. Personally, I study both. However, “Top Grossing” is better at giving you an idea of revenue potential.
Let’s take a look at a smaller and more niche category for the sake of our discussion. We’ll look at “Food & Drink” on the iOS app store. Less big companies and less noise in these smaller categories. You can see the top grossing app is eMeals. A meal planning and grocery shopping list app. Number 5 is another meal planning app. Even has the same green icon. See a trend here? You’ll also see that 16 out of the top 24 grossing apps are “freemium” apps. Meaning, their business model is to give an app away for free and up-sell upgrades.
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.

The loss of the entire SBD limit would cost an Ontario CCPC about $65,000 in additional annual corporate taxes ($500,000 x 13% increase in the corporate tax rate). However, once income is paid out by way of dividends from the CCPC, the analysis we have reviewed suggests that the combined personal and corporate tax burden will increase by only about 1% as compared to the current tax regime.
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.
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The equipment leasing exclusion also isn’t available for leasing activities related to other at-risk activities, such as motion picture films and video tapes, farming, oil and gas properties, and geothermal deposits. For example, if a closely held corporation leases a video tape, it can’t exclude this leasing activity from the at-risk rules under the equipment leasing exclusion.
If you own a rental property, investor or not, you are entitled to certain deductions by the Internal Revenue Service (IRS). That said, nobody is going to hold your hand and tell you which deductions you can legally make; it’s up to you to familiarize yourself with them. So whether you are a passive income investor yourself, or are simply curious as to which deductions landlords can make come tax time, here are a few of the passive income tax benefits you won’t want to miss out on:

One way to make passive income with more involvement is to write and publish an e-book. Got some knowledge or a great story idea you’ve been itching to share? Put it all in a book and sell it online! If all goes well, you could be raking in the royalties for years to come. Of course, there is some considerable work involved in writing, publishing and selling a book. However the advent of self-publishing e-books makes this a considerably easier option than it used to be.


If you have a spare bedroom, you can find a roommate or list the space on AirBnB for travelers. Having a roommate is the more passive of the two, as being an Airbnb host will require more work in the form of turning over the room between stays. This is a super painless way to earn $500 to $1,000 a month without much effort – you may even be able to cover your mortgage payment with this extra income!
Investing in coins and collectibles: Buffalo nickels and Spiderman comic books are good examples of coins and collectibles that can rise in value, and thus offer opportunity for passive income investors. You'll need to get up to speed on the value of any coin or collectible under consideration, but once you do so, you're on the way to price appreciation on a commodity you'll be paying a lower price to buy, and will garner a higher price when you sell.
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.
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.

Active participation isn’t the same as material participation (defined later). Active participation is a less stringent standard than material participation. For example, you may be treated as actively participating if you make management decisions in a significant and bona fide sense. Management decisions that count as active participation include approving new tenants, deciding on rental terms, approving expenditures, and similar decisions.


To explain, $150,000 in passive income is roughly equal to $3 million worth of investments, assuming an average interest rate of 5%. This means that unless your clients are holding millions of dollars worth of investments, they shouldn’t need to worry about losing their small business tax rate. If you’re working with clients whose businesses are this large and they’re concerned about being taxed at the corporate rate, you may encourage them to sell off some of those investments and spend more time developing their active income streams. But for businesses of this size, the corporate tax rate shouldn’t be much of a problem.
I also disagree that every person will crave more and have to go for more. That may be a true statement for a lot, but it doesn’t have to be true and it isn’t for everyone. The other perspective of that is that most likely the people who get themselves to financially freedom, because it is no small feat, are the type of people who are extremely driven and motivated to further challenge themselves, so it’s doubtfully in their nature to stop once they actually can.
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.
3. Start as soon as possible. Building a livable passive-income stream takes a tremendously long time, largely because of declining interest rates since the late 1980s. Gone are the days of making a 5%-plus return on a short-term CD or savings account. Today, the best 12-month CD is at 2.5%, and the best money-market rate is about 1.85%, which is not bad, considering such rates were below 0.5% just a couple of years ago. Know that every $100 you save can generate at least $2.5 in passive income.
Although YouTube has been around for years, it is gaining in popularity as more people “cut the cord” on their cable TV service. There are plenty of people who are polished and have production quality that rivals many of the movies or TV shows that I watch. However, the vast majority are people just like you and me. Don’t be shy. Trust me, no matter what kind of content you publish, there are people way worse. And you will get better, just give it time.

Additionally, if you wrote a book and receive royalty checks, that income is also passive and not subjected to self-employment taxes. But, if you write several books or make updates to an existing book (like this one) then you are materially participating in your activity and your income is earned income. And Yes, you would pay self-employment taxes on that income.
Generally, rental activities are passive activities even if you materially participated in them. However, if you qualified as a real estate professional, rental real estate activities in which you materially participated aren’t passive activities. For this purpose, each interest you have in a rental real estate activity is a separate activity, unless you choose to treat all interests in rental real estate activities as one activity. See the Instructions for Schedule E (Form 1040), Supplemental Income and Loss, for information about making this choice.
But two months later, with the economy slowing down after the financial crisis, his firm began laying people off, and Flynn was informed that after his current projects were finished, he also would be out of a job. At the same time, he couldn’t help but notice that in the LEED exam forums he had frequented, people were referring to him as an expert and directing questions his way. He began to think he might capitalize on that.
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