There Are 2 Types of Income: Ordinary and Passive

While these lists are not all-inclusive, they are some of the most common...

Ordinary business income subject to SE tax (depending on entity selection) consists of the following types:
💸 Sales of product or services
💸 Consulting
💸 Commissions
💸 Short-term real estate (think AirBnB and VRBO)
💸 Pretty much anything that requires material participation

Passive Income can be things like:
💸 Dividends
💸 Interest
💸 Royalties
💸 Long-term rentals (generally 2 weeks or longer)
💸 Capital gains from the sale of assets held for 1 year or longer

When it comes to passive income, think of this side of things as the asset-building side! These types of income are from assets you own such as stocks, bonds, real estate, crypto and more. This income is taxed once.

Both types of income are great, but ideally, as you grow wealth, the passive side will allow you the greatest tax and time savings!