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.
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.
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).
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.
So interest and dividend counts as ordinary income even I don't have to do anything to earn interest or dividend?
@Curious_panda1 wrote:
So interest and dividend counts as ordinary income even I don't have to do anything to earn interest or dividend?
Correct. Passive income for federal income tax purposes is not the same as the generally accepted lay term (e.g., "passive").