[nickff]

I don't know why the BC government makes this distinction, but it does. The $100 from working at your job is taxed at a lower rate than the $100 from renting out a property, though I should add that there are various schemes to avoid paying the 'passive income' tax.

[sdm]

This isn't actually the case now is it? Are you confusing corporate income tax with personal income tax? Normally if you're renting a place out you'd be doing it through a hold co. As the rental income would be your main business income it would be tax at the very low Canadian Controlled Small Business rate; not the general rate.

Even if you were to take the unwise, for both legal and tax reason, choice to not use a hold co, income from rent is FUNDAMENTALLY different from regular income. In that, if you make a loss, you can claim it. That's just not possible with regular income. I.e., if you rental unit is unprofitable, it reduces your taxes in general -- potentially applied in future years. This is not the with "active" income.