Nonpassive Income And Losses

AAA

DEFINITION of 'Nonpassive Income And Losses'

Any income or losses that cannot be classified as passive. Nonpassive income includes any type of active income, such as wages, business income or investment income. Nonpassive losses include losses incurred in the active management of a business. Nonpassive income and losses are usually declarable and deductible in the year incurred.

INVESTOPEDIA EXPLAINS 'Nonpassive Income And Losses'

Nonpassive income and losses cannot be offset with passive losses or income. For example, wages or self-employment income cannot be offset by losses from partnerships or other passive activities. Conversely, nonpassive losses cannot be offset by passive income from partnerships or other sources of income in which the taxpayer is not a material participant.

RELATED TERMS
  1. Material Participation Test

    A set of criteria that determines whether a taxpayer is a material ...
  2. Passive Income

    Earnings an individual derives from a rental property, limited ...
  3. Earned Income

    Income derived from active participation in a trade or business, ...
  4. Passive Loss

    A financial loss within an investment in any trade or business ...
  5. Wealth Management

    A high-level professional service that combines financial/investment ...
  6. Enterprise Investment Scheme (EIS)

    A UK program that helps smaller, riskier companies to raise capital ...
RELATED FAQS
  1. What is the importance of calculating tax equivalent bond yield?

    Fixed-income investors measure portfolio returns using yields. Since most bonds do not produce high returns like equity markets, ... Read Full Answer >>
  2. In which countries do high-income earners pay the most tax?

    It is difficult to identify those countries with the highest tax burdens on high net worth individuals. The most commonly ... Read Full Answer >>
  3. In which US cities do high-income earners pay the most tax?

    There are several different ways that cities tax high-net-worth (HNWIs) individuals. The most direct and obvious method is ... Read Full Answer >>
  4. Why are fee-based accounts preferred by many high net worth individuals (HNWI)?

    High net worth individuals (HNWIs) often prefer fee-based investment accounts for reasons that include reduced conflicts ... Read Full Answer >>
  5. Which states are the most expensive for high-income earners?

    The most expensive states for high-income earners are California, Hawaii and New York. The tax rates assessed by these states ... Read Full Answer >>
  6. What are the risks involved in a banker's acceptance?

    College savings accounts are excellent ways to encourage saving for future college costs. Contact your investment professional ... Read Full Answer >>
Related Articles
  1. Investing Basics

    Oil: A Big Investment With Big Tax Breaks

    Oil and gas investments can provide unmatched deduction potential for accredited investors.
  2. Options & Futures

    Increase Your Disposable Income

    Here are four quick and easy ways to up your spending money.
  3. Options & Futures

    Choosing The Best Disability Insurance

    Social Security benefits can be hard to collect. Find out why you need disability insurance to protect your income, and learn how to choose the right policy for you.
  4. Options & Futures

    3 Simple Steps To Building Wealth

    Getting richer is easier if you take it one step at a time.
  5. Professionals

    Target-Date vs. Index Funds: Is One Better?

    Target-date and index funds are difficult to compare because they differ in both structure and objective, though investors can compare two specific funds.
  6. Investing

    4 Structured Product Types Wealthy Clients Love

    High-net-worth investors find structured products appealing for a variety of reasons. Here's a look at four types.
  7. Investing Basics

    Top 3 Ways to Manage Lump-Sum Windfalls

    Have you just had a load of money drop into your lap? If so, several enviable options are available to you. Which one is the best choice?
  8. Savings

    Best Banks to Stash Your Million Dollars

    Get the richest perks and red carpet treatment for you and your money from these financial institutions.
  9. Professionals

    Investors Beware! Don't Make These Dumb Mistakes

    Sometimes mistakes make for the best lessons. That said, it's still better to learn from someone else's investing mistakes.
  10. Mutual Funds & ETFs

    Why Mutual Funds are Still Better than ETFs

    Mutual funds might not be as sexy as they used to be, but they offer some advantages over ETFs – especially for certain types of investors.

You May Also Like

Hot Definitions
  1. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
  2. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  3. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  4. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  5. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  6. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!