9 Types of Unique Passive Income

Instead of working eight hours per day or more, you can work much less.

Many people dream about living off passive income. The concept of working hard and creating a perpetual stream of income is appealing.

Alternatively, you can be lucky and receive a large inheritance. This income source is different from receiving a regular salary in a  9-to-5 job.

The Internal Revenue Service (IRS) considers this source of income and several others as unearned income.

What is Unearned Income?

Unearned income is income from sources, not from employment or a job. The IRS views unearned income as income from sources other than personal effort.

It is essential to know the difference between earned and unearned income since they are taxed differently in the US.

Earned income is subject to regular income tax. On the other hand, unearned income is not usually subject to ordinary  income tax.

Types of Unearned Income 1. Investment Income

An investor selling an asset for profit will generate capital gains from the sale. The capital gains are considered as unearned income.

2. Long-Term Capital Gain Distribution

Mutual funds pay capital gains distributions to shareholders. This money comes from selling stocks, bonds, or other assets owned by the mutual fund.

3. Dividend Income

Dividend income results from money paid to stockholders from the dividends. An investor can generate passive income and possibly live off dividends.

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