Passive income

Passive income is money earned from an asset or arrangement that needs little ongoing effort to maintain. Common examples include interest on savings, dividends paid by stocks, and rent collected from property. It stands apart from active income, which is the wage or salary a person earns in exchange for hours worked.

Most passive income still requires effort or capital up front. Someone might buy a rental property, build an investment portfolio, or deposit funds into an interest-bearing account before any return begins. After that, the income tends to arrive with less day-to-day work.

Passive income still carries risk and upkeep. Investment values can fall, interest rates can change, and property involves maintenance and vacancy costs. Earnings are often taxable, and the tax treatment can differ from that of wage income depending on the source and the jurisdiction.