Passive Versus Active Income Real Estate

One of the best tax benefits of passively investing in real estate specifically rental properties is the ability to generate a tax loss through the magic of depreciation while still being cash flow positive.

Passive versus active income real estate. If you have a traditional job you re more than likely earning active income. So this could include your salary any commission you might make tips etc. On the other hand passive income is typically subject to the net investment income tax niit of 3 8 whereas active income is not. However most people think of real estate investing as one or the other.

Active income is what comes from performing a task in exchange for money. In reality it s more of a spectrum with passive on one end and active on the other. Obviously you will not be sitting around if you choose a passive income investment strategy but you also won t be running around as much. Either it s active or it s passive.

There are some investment methods that i don t mention much because they re so extremely active e g fix and flipping.