What is passive income?

FAQ: What is passive income?

Answer: According to the IRS, passive income can only be generated by rental activity or by a business in which you have a financial interest but do not play an active role. For example, if you own an apartment that you rent out – the income that your renters pay to you is considered passive income. The only other way to create passive income is to bankroll a business that you do not actively participate in, commonly called being a silent partner.