Unearned Income
Unearned Income, also known as Passive Income, refers to income that individuals or businesses earn through means other than direct labor or active business activities. It can encompass rental income, dividends, interest, royalties, licensing fees, capital gains (such as profits from the appreciation of investments in stocks, real estate, etc.).
Definition: Passive income refers to income earned by individuals or businesses through non-labor means, which do not require direct participation in labor or business activities. This may include rental income, dividends, interest, royalties, licensing fees, and capital gains (such as profits from the appreciation of stocks or real estate investments).
Origin: The concept of passive income dates back to ancient times when landlords earned rental income by leasing land without personally farming it. With the development of financial markets, the forms of passive income have diversified, now including various investment methods such as stocks, bonds, and real estate.
Categories and Characteristics: Passive income can be categorized into the following types:
- Rental Income: Income earned by renting out real estate or other assets. It is relatively stable but requires asset management and maintenance.
- Dividends: Profits distributed by companies to shareholders. It is related to company performance and may fluctuate.
- Interest: Income earned through financial instruments such as deposits and bonds. It has low risk but also low returns.
- Royalties and Licensing Fees: Income earned through intellectual property (such as books, music, patents). It involves one-time input with long-term returns.
- Capital Gains: Profits earned from the appreciation of assets (such as stocks, real estate). It has high potential returns but also high risk.
Specific Cases:
- Case 1: Mr. Zhang purchased an apartment and rented it out, earning monthly rental income. This income is considered passive because Mr. Zhang does not need to directly participate in labor, only managing and maintaining the apartment.
- Case 2: Ms. Li invested in the stocks of a listed company and received annual dividend income. This income is also passive because Ms. Li does not need to participate in the company's operations.
Common Questions:
- Question 1: Is passive income subject to taxation?
Answer: Yes, most countries tax passive income, such as capital gains tax and dividend tax. - Question 2: Is passive income stable?
Answer: The stability of passive income depends on the specific type. For example, rental income is relatively stable, while dividends and capital gains may fluctuate.
