What is the taxation of passive income?

In Tennessee, the taxation of passive income is based on the federal tax law and is subject to IRS regulations. Passive income includes income from rental activities, royalties, and certain other investments, such as income from trusts. At the federal level, passive income is taxed at ordinary income rates. This means that the income is taxed at the same rate as wages, salaries, and other forms of earned income. In Tennessee, the state’s income tax law requires individuals to include passive income in their taxable income. The state’s income tax rate varies and is based on the individual’s total income. As with the federal rules, passive income is taxed at the same rate as other forms of income. Some passive income may be eligible for preferential tax treatment. For example, qualified dividend income is taxed at a lower rate than ordinary income. Rental income, on the other hand, is generally taxed at the same rate as other forms of income. It is important to note that the taxation of passive income is subject to numerous exceptions and special rules. Taxpayers should consult a tax professional to ensure that they are aware of all applicable rules that may affect their income taxes.

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What is the taxation of passive income?

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