Warren Buffet says,
“If you don’t learn how to make money while you sleep, you will work the rest of your life.”
You are probably aware I have a substantial passive income from real estate, which is why I can donate 100% of my book and coaching program profits to the charity Shelter To Soldier.
Another advantage of passive income, instead of earned income, is that it has a preferential tax treatment.
But what if you don’t have enough money to buy real estate? Keep reading…
With earned income, you have your income taxes. The higher your income, the higher the percentage tax rate you’ll pay. For 2020, if you are single and earn less than $40,000 your tax rate is 12%.
If you earn between $40,126 and $85,525 your income tax rate is 22%. Over $163,301 your income tax rate is at 32%.
As a reminder, passive income is created from one of two primary areas:
- A business or trade where you do not materially participate, like you own a gas station, but do not work there.
- Renting real estate where you do not materially participate, and it is not a part of your job as a real estate licensee or broker.
An example with real estate is if you own an apartment building and the tenants pay rent. The rental income is reduced by all of your expenses and the depreciation of the building. That reduced rental income is now taxed at a lower rate than your ordinary earned income if you have a job and earn over $163,301 per year.
But what if you don’t have enough money to buy real estate to create a passive income?
Here are some alternatives:
- Dividends from stock that you own.
- Renting your home for less than 14 days per year
- Royalty income from books, records, art work or a movie where you were an actor
- Renting out equipment that you own; like an automobile, truck, carpet shampoo machine, chain saw, or other tools
And if you want a list of websites where you post items you own and want to rent out, then click on this link for an article I read in the Los Angeles Times.
To Your Prosperity,
Rennie
