Active Income – Income for which services have been performed. This includes wages, tips, salaries, commissions and income from businesses in which there is material participation. Active income is income from any of the following:

– Wages, salary, commissions, bonuses, or other payments for services rendered;
– Profit from a trade or business in which you are a material participant;
– Gain on the sale or other disposition of assets used in an active trade or business;
– Income from intangible property, if your personal efforts significantly contributed to the creation of the property.

Passive income is income from either of the following:

– Any trade or business or income-producing activity in which you did not materially participate; or
– Subject to certain exceptions, all rental activities, whether you materially participate or not.

» Read more: Active Vs Passive Income? No Active and Passive Income