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Types of Income
Earned income is income from wages, salaries, tips and other taxable employee pay in addition to net earnings from self-employment. This is also referred to as active income.
Portfolio income is income such as interest, dividends, royalties, and gains or losses from investments.
Passive income is income from a passive activity, such as rental real estate. If you have a passive loss, you can use it to offset your passive income. Passive losses cannot normally be deducted against other income. If you actively participate in a passive rental activity, you may be able to deduct up to a $25,000 loss. However, this is subject to adjusted gross income limitations.