What Is Passive Income Limitation

This deduction phases out 1 for every 2 of magi above 100 000 until 150 000 when it is completely phased out.

What is passive income limitation. Income limitations general income. Passive income is the compensation you receive from a rental property or other business enterprise for which you re not actively involved or in which you don t materially participate. Under the passive activity rules you can deduct up to 25 000 in passive losses against your ordinary income w 2 wages if your modified adjusted gross income magi is 100 000 or less. Passive income means dividends interest royalties rents and annuities.

It includes most of the foreign source active business profits of domestic corporations and their foreign subsidiaries. It includes all income other than passive income. Passive income when used as a technical term is defined as either net rental income or income from a business in which the taxpayer does not materially participate and in some cases can.