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Categories: General Tax Terms

Passive Income refers to earnings derived from rental property, limited partnerships, or other enterprises in which a person is not actively involved. Unlike active income, which is earned through direct participation in work or services, passive income is generated with minimal ongoing effort.

Examples of passive income include royalties from creative works, dividends from investments, and income from a business in which one is not actively involved. This type of income is often favored for its potential to generate revenue while allowing individuals to focus on other pursuits. In tax terms, passive income may have different implications compared to active income, particularly concerning the ability to offset losses or the applicable tax rates.

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