Residual Income Definition

Residual income -=> Residual income definition

Residual income is a rent received on a regular basis, with little effort required to maintain it.

The American lnternal Revenue Service categorizes income into three broad types, active (earned) income, residual income, and portfolio income. lt defines residual income as income from “trade or business activities in which you do not materially participate.” Other financial and government institutions also recognize it as income obtained as a result of capital groMh or in relation to negative gearing. Residual income is usually taxable.

Some examples of residual income are:

• Earnings from a business that does not require direct involvement from the owner or merchant.

• Rental from property.

• Royalties from publishing a book or from licensing a patent or other form of intellectual property.

• Earnings from internet advertisements on websites.

• Residual income, repeatedly regular income earned by a sales person, generated from the payment of a product or service, that must be renewed on a regular basis in order to continue receiving its benefits.

• Dividend and interest income from owning securities, such as stocks and bonds, is usually referred to as portfolio income, which may or may not be considered a form of passive income.

• In the United States, portfolio income is considered a different type of income than residual income.

• Pensions

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