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GLOSSARY

Canadian Financial, Real Estate and Mortgage Glossary

How often this word is used
 
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38% - Moderately

Passive Income


Synonyms:inactive income
Filed Under: financial-banking, investments, taxation
Tags: investment, pension, retirement, reverse mortgage
 

Definition of passive income

passive income
1. Income streams that come from sources that are received on a periodic basis, often with little effort to maintain. Passive income can include things such as rental income, royalties, dividends or pensions.

Related Terms and Acronyms:

  • active income   Active income refers to wages, tips, and profits from your business or employment that you partake in. It also includes portfolio income such as interest and dividends, but you cannot usually offset active income with passive losses.
  • capital gain (CG)   The profit made by the seller when real estate or other capital assets are sold. Capital gains are taxed more favourably than earned income. However, this can be dependent on your tax bracket and the length of time you owned the asset before it was sold. You could pay approximately one-third to one-half less tax than you would pay on the same amount of earned salary.
  • dividend   Distribution of earnings to shareholders. In credit unions, it's the money paid to members for deposits, similar to the interest banks pay to their customers for deposits.
  • income   The money earned in a specific time period.
  • income tax   The main source of revenue for the federal government and many Provinces. The tax is based on your earned and unearned income. The amount or percentage taxed is based on the amount of income, using the governments graduated tax scale.
  • investment income   Income that is earned from investments such as interest, dividends, and capital gains.
  • passive activity   An activity in which a person does not materially participate such as real estate rentals and limited partnerships.
  • passive loss   Loss from a passive activity. Passive loss rules limit the amount of passive loss you can deduct to the total of your other income from passive activities.
  • reverse mortgage   A loan that allows an older homeowner to convert built-up equity into cash. The loan comes due when the owner dies, sells the house or moves out.

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