 TITLE: How Is Passive Income Taxed? CONTENT: How Does Passive Income Work?\n-----------------------------\nPassive income is a way to earn money on autopilot. Most opportunities require an upfront investment of time, money or both.\nAccording to IRS Publication 925, there are two forms of passive activities:\n*   Business or trade activities that you don't materially participate in.\n*   Rental activities (even if you materially participate)—except for activities done to fulfill your duties as a real estate professional.\nCommon ways to earn passive income include investing in dividend stocks, exchange-traded funds, dividend index funds, bonds, bond index funds, rental properties and high-yield savings accounts. You can also invest in a peer-to-peer lending platform (and earn self-charged interest), real estate investment trust or become a silent partner in a business (without participating \"materially\").\nSome passive income methods don't cost much and are within reach of many people who have an income. These methods can help you build up your retirement savings, but their proceeds may not make much of an impact on your monthly income in the short term. Unfortunately, making passive income that's enough to quit your day job and live off of requires an initial investment that's out of reach of most people. END