What is the taxation of passive income?

Passive income is subject to taxation in Washington just as it is in every other state. Taxpayers in Washington must report all types of income, including passive income, when they file a tax return. Passive income includes income from rental properties, stocks and bonds, or any other investments. This also includes income from businesses in which the taxpayer does not take any part in managing the business. In Washington, passive income is taxed at the state’s regular income tax rate. That rate varies depending on the level of income. For example, for 2019 taxes, those with incomes lower than $35,950 are taxed at a rate of 0%, incomes of $35,951 to $131,250 are taxed at a rate of 5.90%, and incomes higher than $131,250 are taxed at a rate of 8.90%. Washington will also tax any distributions from a retirement account, such as an IRA or 401(k), at the regular income tax rate. Social Security income is not taxed in Washington. By understanding the taxation of passive income in Washington, taxpayers can ensure that they report all of their income accurately when filing their taxes. This is important to obey the law and to avoid any potential penalties.

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What is the taxation of passive income?

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