Does interest receive on 1099-INT consider ordinary income or passive income? If passive, can I offset it with my rental loss?

[Curious_panda1]

I do not qualify for REPS and my income is higher than the limit that allows me to deduct ordinary income with my rental loss.

However, I am wondering if interest received from saving account consider as passive income? If so, what can I do in Turbo Tax to offset income from 1099-INT with my rental loss?

Same question goes to dividend. Does income reported on 1099-DIV consider as passive income or ordinary income?

Side note: I am not materially participating in any of the activity that result income from dividend and interest. I just deposit my money to the bank and bought stock a few times.

[Anonymous_]

Interest income is treated as ordinary income (taxable interest income, of course).

Dividends are also treated as ordinary income, but qualified dividends receive preferential tax treatment (similar to long-term capital gains).

[Anonymous_ · Accepted solution]

Passive income, in federal income tax terms, is, in broad terms, income that is derived from a passive activity, as set forth in Section 469.

See https://www.law.cornell.edu/uscode/text/26/469

"Passive income", as a generally accepted lay term, connotes income for which you do not have to do anything (like work or run a business). However, that is not what is meant by passive income or loss for federal income tax purposes.

[Curious_panda1]

So interest and dividend counts as ordinary income even I don't have to do anything to earn interest or dividend?

[Anonymous_]

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@Curious_panda1 wrote:

So interest and dividend counts as ordinary income even I don't have to do anything to earn interest or dividend?

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Correct. Passive income for federal income tax purposes is not the same as the generally accepted lay term (e.g., "passive").