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Passive income is income resulting from cash flow obtained on a regular basis, requiring minimal to no effort by the recipient to maintain it.

The U.S. Internal Revenue Service categorizes income into three broad forms, active income, passive income, and portfolio income.1 It defines passive income as only coming from two sources: rental activity or"trade or business activities in which you do not materially participate. "23 Other financial and government institutions also recognize it as an income obtained as a result of capital expansion or in relation to negative gearing.

Passive income differs from earned income and portfolio income in an assortment of ways. Passive income is generally defined as a stream of income earned with little effort, and it is referred to as innovative passive income when there is not much effort needed from the individual receiving the passive income in order to increase the flow of income.

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Passive income is different from active income which is defined as any earned income including each of the taxable income and wages the earner gain from working. Linear active income refers to one constantly needed to stay busy to maintain the stream of income, and once an individual chooses to stop working the income will probably even stop, examples of active income include salary, self-employment income, material participation in an s corp, or a partnership.4 portfolio income is derived from investments and includes capital gains, interest, dividends, and royalties.5.

Any kind of cash flow property income which includes profits from ownership of funds, rent from ownership of assets such as Rental income and incoming cash flow from property or any piece of real estate, and interest from owning financial assets.6

Royalties are payments made by one company (the licensee) to another company or person (the licensor) in exchange for the right to use intellectual property (book, music, movie ) owned by the licensor.

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Forms of limited partnerships may be considered passive so long as the limited partner does not have any role in the company and they exchange their own capital investment in return for a share of their actions profit.

In order to be considered a rental activity, tangible property is used by customers and the income paid from the activity comes in the amount paid for using their property and is not considered a rental if:

"Earned Income vs Passive Income vs Portfolio Income: A Comparison - Only Ask Ben Why". Just Ask Ben Why. 2015-06-22. Retrieved 2018-05-12.

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a b "Publication 925 (2017), Passive Activity and At-Risk Rules Internal Revenue Service". www.irs.gov. Retrieved 2018-05-12.

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It's quite possible if you are consistent and persistent then within a period of time you may build a like this substantial residual income. Dont be surprised is that this passive income amount exceeds your main income from your regular job or business.

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This is maybe one of the most recommended ways of earning a passive income. Having a website that has good readership of regular as new subscribers can provide access 2 more than one source of passive income.

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