I am 30 years old and am retired. Previously, I made a modest salary as an Army officer. I own three duplexes and a quadplex in central Texas (10 rental units in all), and each of the properties provide me with net rental yields in excess of 15%. The last deal is actually an infinite return as my partner paid the down payment in return for a 50/50 split on a property that would otherwise provide a net rental yield of 18%. The above net rental yields also factor in an excellent property management team who manages my properties while I pursue other investment opportunities. To date, I have never interacted with any of my tenants nor have I ever had to personally deal with any maintenance issues.


To the uninformed, these varying tax rates initially look unfair. What many people don’t understand is the big difference between “ordinary income” (from wages, a salary, short-term capital gains and interest) and “passive income” (from stock dividends and long-term capital gains). The federal government taxes ordinary income at up to 35 percent and passive income at 15 percent.
If you qualify as a real estate professional, rental real estate activities in which you materially participated aren’t passive activities. For purposes of determining whether you materially participated in your rental real estate activities, each interest in rental real estate is a separate activity unless you elect to treat all your interests in rental real estate as one activity.

Even if each patron only contributes a very small amount each month, it can still be a huge source of income. Take a look at the Patreon page for Kinda Funny, an internet video company. They have over 6,209 patrons which means an average of just $3 a month would be a monthly income of almost $19,000 – plus they get cheerleaders that are always happy to spread the word on their brand.


The current laws don’t really distinguish between active and passive income. Since passive income is already taxed at a lower rate, companies can use dividends as a way to gain a tax advantage by paying dividends out of active (and lower-taxed) income rather than passive income. Business owners will now have to prove they’re paying dividends out of investment income, which will make it more difficult to game the system by getting a double deduction on lower-taxed dividends. Some business owners use dividends as a method of retirement savings. If your small business clients get their household income from dividends, talk to them about alternative strategies, such as setting up payroll and switching to a salary. While salaries are taxed at a higher rate, they’re also helpful for retirement savings as they involuntarily trigger Canada Pension Plan contributions.
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.

For example, I wrote “How to Get a University Job in South Korea” in October 2014. Sales peaked for the first few months after I released it at $50+ a month, but I’m still selling a few copies here and there and making $10-20 a month. The best part about it is this $10-20 is for no work. I no longer do any sort of promotion for it aside from perhaps mentioning it in a blog article if appropriate. That’s some passive income awesome!
In mid-2017, I sold my San Francisco rental property for 30X annual gross rent and reinvested $500,000 of the proceeds in real estate crowdfunding. I’m leveraging technology to invest in lower valuation properties with higher net rental yields in the heartland of America. With the new tax policy starting in 2018 capping state income and property tax deductions to $10,000 and limiting interest deduction on mortgages of only $750,000 from $1,000,000, expensive coastal city real estate markets should soften at the expense of non-coastal city real estate.
There’s a few different free routes you can take. You can release both a paid and free app and have your free app up-sell your paid app. This gives you visibility in both paid and free categories. More eyes could potentially mean more downloads and more revenue. The most popular route is the freemium version with in-app purchases. You give out the most essential functions of the app for free and up-sell your users to more features they might want. This usually converts better than up-selling to a paid app, since the user will never have to leave your app to make a purchase.
The SBD provides a low rate of corporate tax on the first $500,000 (known as the “SDB limit”) of active business income annually. Business owners and incorporated professionals who don’t need to pay out corporate earnings to fund their personal lifestyles are able to enjoy a significant tax deferral of up to 41 per cent by simply leaving funds in their CCPC and investing them.

If you know anything well, a place, how to fix something, how to make something, how to do something, you can write a guide for it. You can sell your guide as an e-book, offer it as a download for a fee on your site or reach out to bloggers with similar content and ask if they will offer it as a paid download on their website (for a price of course).

Given the growth in the sharing economy, your junk can start to pay for itself. For example, if you have some awesome vintage furniture inherited from your grandmother sitting in a storage unit, you can rent this out to photographers for their “styled shoots” which are becoming all the rage. If your furniture is more modern but you still can’t bear to get rid of it – perhaps a home stager will be interested.

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.
If you or your spouse actively participated in a passive rental real estate activity, the amount of the passive activity loss that’s disallowed is decreased and you therefore can deduct up to $25,000 of loss from the activity from your nonpassive income. This special allowance is an exception to the general rule disallowing the passive activity loss. Similarly, you can offset credits from the activity against the tax on up to $25,000 of nonpassive income after taking into account any losses allowed under this exception.
stREITwise offers a hybrid investment between traditional REIT fund investing and the new crowdfunding. The fund is like a real estate investment trust in that it holds a collection of properties but more like crowdfunding in its management. The fund has paid a 10% annualized return since inception and is a great way to diversify your real estate exposure.
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.
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.
Next, you can sell things you already have and make. For example, if you’re a teacher and have some great lesson plans, Teachers Pay Teachers allows you to put up and sell your lesson plans. You need the plan for your class anyways, why not sell it? The same goes for photos you’ve taken. You don’t need to be a professional photographer, and you can sell your photos on sites like iStock.
A Risk Score of 10 means no risk. A Return Score of 1 means the returns are horrible compared to the risk-free rate. A Feasibility score of 10 means everybody can do it. A Liquidity Score of 1 means it’s very difficult to withdraw your money without a massive penalty. An Activity Score of 10 means you can kick back and do nothing to earn income. To make the ranking as realistic as possible, every score is relative to each other. Furthermore, the return criteria is based off trying to generate $10,000 a year in passive income.
An item of deduction from a passive activity that’s disallowed for a tax year under the basis or at-risk limitations isn’t a passive activity deduction for the tax year. The following sections provide rules for figuring the extent to which items of deduction from a passive activity are disallowed for a tax year under the basis or at-risk limitations.
In terms of the returns, peer-to-peer lending can be profitable, particularly for investors who are willing to take on more risk. Loans pay a certain amount of interest to investors, with the highest rates associated with borrowers who are deemed the biggest credit risk. Returns typically range from 5% to 12%, and there's very little the investor has to do beyond funding the loan.

That said, from time to time I enjoy writing about some of the “other roads to Dublin.” Fancy investments are interesting and sometimes have different risks and rewards when compared with a basic index fund portfolio. Entrepreneurship has changed my life and that of many other physicians. Early financial independence opens all kinds of other doorways in your life. So in a blog about all things financial for high earners, from time to time I write about these other subjects. Today is one of those days.
So that is where it gets a little weird too- tax classifications, which might be slightly different than the term defining how much work you do. Owning a business will always be taxed as active income. Rental properties will always be taxed as passive income. The reason being (all theoretical to an extent) is that, in theory, if the business stops selling or performing, income is lost. In theory, rental properties can continue to make money if you do no work on them. If I had a rockstar property manager who constantly handled everything about the property, I could technically do zero work and still receive income. In theory, even if the PM stopped working the property, if a tenant stayed there forever and kept sending money, you get income with no work. Not all that realistic for you to never be involved, and most certainly to succeed without a PM, but taxes assume it’s possible. Work has to continue to happen with a business for it to make income, therefore it’s active.
One of the biggest advantages of passive income is that it works when you aren’t working. The more passive the income, the less work that is involved at all. This appeals to my inherent laziness. But consider a high-powered surgeon. Sure, her hourly rate, while she is operating, is astronomical.  But as soon as she walks out of the OR, that income stream stops until she scrubs in again. Vacation? Not only is there no income stream, but there is likely a negative one due to overhead. When a passive earner is on vacation, that income stream, small as it may be in comparison to the surgeon, keeps right on working. Interest works both ways and as my kids know, interest should be something you get not something you pay. As J. Reuben Clark said nearly a century ago:
The key here is that income from equipment leasing or rental real estate is generally treated as passive income, with only limited exceptions. Other businesses, including sole proprietorships, partnerships, limited liability companies, and S corporations, produce passive income if the individual taxpayer in question doesn't meet the standard for material participation.
The PPACA Medicare tax is a dangerous tax IMHO. It is an entirely new kind of tax. It is small and in jeopardy of going away but I predict it won’t. If it goes away it won’t be for long and it will grow over time – like most taxes. 3.8% is a starting point. This one has the added political appeal of “taxing the rich” and “unearned income” that makes it more palatable to the electorate.
The appeal of these passive income sources is that you can diversify across many small investments, rather than in a handful of large ones. When you invest directly in real estate, you have to commit a lot of capital to individual projects. When you invest in these crowdfunded investments, you can spread your money across many uncorrelated real estate ventures so individual investments don't cause significant issues.
Go to IRS.gov/Forms to view, download, or print all of the forms and publications you may need. You can also download and view popular tax publications and instructions (including the 1040 instructions) on mobile devices as an eBook at no charge. Or, you can go to IRS.gov/OrderForms to place an order and have forms mailed to you within 10 business days.
No matter what, if you own something, you will have to put some effort towards it, yes. Even if you are as hands-off as possible, you may need to use your brain occasionally. Although I would say with mine, I might have to use my brain for a total of a 30 minutes or less a year. The only thing I do for my properties are answer emails or calls from my property manager and give him approval to do random things. That doesn’t even happen that often though. The most ‘work’ I ever do on my properties, other than give approval for repairs, is stress if there is a vacancy or turnover or something. Stressing is pretty passive though. Oh, and I spend 20 minutes or less gathering any documents I have for my accountants come tax time.
Now I’ve been using Swagbucks for a while and have found the money works out to just under $2 an hour so this isn’t something that’s going to make you rich. You’d have to work 2,500 hours to make $5,000 so that’s about three and a half months, non-stop. The thing with Swagbucks though is you can do it when you’re doing something else so I flip through surveys and other stuff while I’m cooking dinner or flipping channels.
As a result of this tax rate differential, the owner of a CCPC is almost always better off retaining corporate earnings and investing within their corporation. While a similar amount of combined corporate and personal tax is ultimately paid by business owners when monies are withdrawn through dividends, taxes can be deferred until such time as the money is required personally. This effectively allows business owners to temporarily obtain the benefit of investing a larger amount of money than would otherwise be available if they earned the money personally or immediately withdrew profits from their corporation.
The IRS requires REITs to pay out at least 90% of its income to shareholders.  Thus, REITs tend to be higher yield since a large fraction of the earnings come out as dividends, which may be beneficial for certain income oriented investors.  The flipside is the tax cost for investing in REITs since income must be distributed and as a holder the taxes flow through to you.

Buy a small business: A local small business, like a car wash or a laundromat, is a great way to put money down on a money-making venture. Automate it so you don't have to be on the premises unless you're collecting money. Go into a local business with your eyes wide open - study the books, especially on income and expenses, and examine water and utility bills if your venture will be open 24 hours.


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.
If you qualified as a real estate professional for 2017, report income or losses from rental real estate activities in which you materially participated as nonpassive income or losses, and complete line 43 of Schedule E (Form 1040). If you also have an unallowed loss from these activities from an earlier year when you didn’t qualify, see Treatment of former passive activities under Passive Activities, earlier.
In most cases, all rental real estate activities (except those of certain real estate professionals, discussed later) are passive activities. For this purpose, a rental activity is an activity from which you receive income mainly for the use of tangible property, rather than for services. For a discussion of activities that aren’t considered rental activities, see Rental Activities in Pub. 925.
Hello from the UK! Fundrise and Wealthfront are only available to US residents it seems :(. Any other readers from the UK here? The only thing I have managed to do from Sam’s list is getting a fixed rate bond (CBS is having a 5-year fixed rate at 2.01% – not great but the best I could find ). Don’t know if the FIRE movement will ever take off here but would love to trade tips/ideas on how to reach FI and have the freedom to consider alternative rythms to living.
If you need cash flow, and the dividend doesn’t meet your needs, sell a little appreciated stock. (or keep a CD ladder rolling and leave your stock alone). At the risk of repeating myself, whether you take cash out of your portfolio in the form of “rent”, dividend, interest, cap gain, laddered CD…., etc. The arithmetic doesn’t change. You are still taking cash out of your portfolio. I’m just pointing out that we shouldn’t let the tail wag the dog. IOW, the primary goal is to grow the long term value of your portfolio, after tax. Period. All other goals are secondary.
Despite the anger expressed by the tax community and business owners across the country, the government reiterated in October 2017 its intention to move forward with the proposed passive income rules and promised that further details will be revealed as part of the 2018 budget. February 27, 2018 was the date that the so anticipated federal budget was released and to the surprise of tax practitioners and private business owners, the government completely abandoned its July 2017 passive income proposals. The 2018 budget instead proposes to further restrict the access to the small business deduction (which will not be discussed here) and to refine the refundable taxes regime applying to CCPCs. The proposed new refundable taxes regime is less complex and less costly than the framework suggested by the July 2017 proposals, however, Finance proposes to limit another type of tax deferral allowed prior to the budget as discussed in more details below.
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.
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