As a result, there is voice from the public that personal tax has been degraded to a 'wage tax' aimed at exploited middle income working class.Īs mentioned above, passive income is, in general, income that requires little to no work to produce and maintain. The 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, which to a large extent has not been taxed to the fullest extent. Generally speaking, high-income groups have more diversified sources of revenue leading to a higher probability to have access to hidden income, and therefore passive income can also be a good excuse for tax avoidance by transferring active income into the passive one. What one person sees as passive income may be the active income to another person. The degree of passivity of an income depends on the perspective of the person concerned. Whilst to the end beneficiary the income may be passive, there can often be effort expended by others to generate value, such as renovations to modernize and enhance a building that increases rental income and/or creates an increase in the property's value. Just because one person considers a source of income to be passive, does not mean it was the case in creation of the wealth/revenue/asset value increase. Examples of these longer term sources of passive income can include: property dividends debt and other appreciating asset classes. Some passive incomes may last for several years, or even centuries across generations. It can also come from a source that has a likely continuity over time but is not guaranteed. Passive income is not always a lump sum payment, like an inheritance or proceeds from the sale of an asset such as a home or stock. Passive income can be a way of creating financial independence and early retirement, because the beneficiary will receive an income regardless of whether they are materially active in the activity creating the revenue. It can take a long period of work and accumulation before passive income can be earned. Some jurisdictions' taxing authorities, such as the Internal Revenue Service in the United States of America, distinguish passive income from other forms of income, such as earnings from regular or contractual employment, and may tax it differently. Examples of passive income include rental income and business activities in which the earner does not materially participate. It is called progressive passive income when the earner expends little effort to grow the income. Passive income, as an acquired income, is the result of capital growth or is related to the tax deduction mechanism, and is taxable. In the United States, the IRS divides income into three categories: active income, passive income, and portfolio income. It is often combined with another source of income, such as a side job.

Passive income is a type of unearned income that is acquired automatically with minimal labor to earn or maintain. ( Learn how and when to remove this template message) ( May 2022) ( Learn how and when to remove this template message) See Wikipedia's guide to writing better articles for suggestions. This article's tone or style may not reflect the encyclopedic tone used on Wikipedia.

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