[TallGuyShort]

I'm also concerned about how arbitrary the line is between passive and active income. Let's say I rent out a lot of properties. I have legal obligations to maintain those properties. That might be a lot of work. A full-time job, even. Let's say I make a lot of money on investments. I might be ensuring the success of those investments by advising and doing research on / for the companies I'm investing in. Both of those things get called passive income, but they very well might not be in reality.

[skewart]

Me too. Distinguishing between passive and non-passive income seems in any kind of technical, legal seems incredibly difficult. It reminds me of the old "I know it when I see it" definifinition of pornography, which is a terrible definition for a law.

I'm actually really curious about the law now. Stock dividends must be considered passive income. So would interest from your local bank savings account. So would a SaaS app that you set up and basically runs itself with minimal maintenance.

[SilasX]

Very true! Given a sharp enough tax rate difference between two kinds of income (or two activities), you just generate a ton of socially-useless work aimed at blurring one into the other.

[sdenton4]

The term rent selling stats with 'rent' for a reason. The maintenance on any single property is miniscule compared with the rent extracted. Added over many properties, sure, might be a lot of work. But you're also getting a lot of rent.

The bigger part of the problem is the tendency to pass on the tax on passive income to the tenant.

[will_hughes]

This is also why when someone has enough capital to buy enough properties to extract a full-time wage out of the rent, you can be sure they're also not going to be doing the work themselves.

They'll offload it to a property manager/real estate agent to do all that work.