Passive income
Introduction


**Passive income** is a type of [unearned income](/wiki/Unearned_income "Unearned income") that is acquired with little to no [labor](/wiki/Wage_labor "Wage labor") to earn or maintain. It is often combined with another source of [income](/wiki/Income "Income"), such as [regular employment](/wiki/Employment "Employment") or a [side job](/wiki/Side_job "Side job"). Passive income, as an acquired income, is taxable.

Examples of passive income include [rental income](/wiki/Rental_income "Rental income") and business activities in which the earner does not materially participate. Some jurisdictions'  [taxing authorities](/wiki/Revenue_authority "Revenue authority"), such as the [Internal Revenue Service](/wiki/Internal_Revenue_Service "Internal Revenue Service") in the United States, distinguish passive income from other forms of income, such as income from regular or  [contractual employment](/wiki/Employment_contract "Employment contract"), and may tax it differently.

It can take a long period of work and accumulation before passive income can be acquired. Passive income can be a way of creating [financial independence](/wiki/Financial_independence "Financial independence") and early retirement, because the [beneficiary](/wiki/Beneficiary "Beneficiary") will receive an income regardless of whether they are materially active in the activity creating the revenue.

Passive income can come in the form of a [lump sum payment](/wiki/Lump_sum "Lump sum"), like an [inheritance](/wiki/Inheritance "Inheritance") or proceeds from the sale of an [asset](/wiki/Asset "Asset") such as a home or [stock](/wiki/Stock "Stock"). It can also be paid out over time, though not necessarily at a regular amount. Some passive incomes may last for several years, or even centuries, across generations. These typically involve appreciating [asset classes](/wiki/Asset_classes "Asset classes"), such as [property](/wiki/Property "Property"), [dividends](/wiki/Dividends "Dividends"), or [debt](/wiki/Debt "Debt").

Passive incomes can be used as a [tax avoidance](/wiki/Tax_avoidance "Tax avoidance") scheme. Generally speaking, high\-income groups have more diversified sources of revenue and are more able to hide particular sources, and hiding active income as passive income can lead to a lower tax bill. This [loophole](/wiki/Loophole "Loophole") has resulted in a large amount of "passive income" such as income from property transfer and property leasing, and even "earned income" such as income from non\-regularly occurring labor [remuneration](/wiki/Remuneration "Remuneration"), which is sometimes taxed at a lower rate. As a result, there is voice from the public that personal tax has been degraded to a "wage tax" aimed at  [exploited](/wiki/Exploitation_of_labour "Exploitation of labour") middle income working class. 


Who are more likely to use passive income as a tax avoidance scheme?