Active Income

Active income is a form of income for which labor services were performed, such as for self-employment or for another entity. This form of income includes wages, salaries, tips, fees, commissions, and any income from self-employment in which services were performed. The opposite of active income is passive income, in which no labor is performed (but for which income is still received). Active income is defined according to rules set forth by the Internal Revenue Service. The distinction between active income and passive income is important because active income can offer more tax deduction advantages than passive income can. As a rule, one cannot offset active income with passive activity losses. Active income is sometimes called non-passive income as well.

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