If I get paid interest from an account, is that considered to be an active income?

Answer by  cgroverla (516)

Interest income is reported on Line 8a of Form 1040. Schedule B is required if interest income exceeds $1,500. Interest is not passive income or investment income and cannot be used to offset passive losses or investment expenses. Interest income is taxed as ordinary income, the same as wages.

Answer by  Chaneygirl (1755)

Interest is not active income. It is passive. Active income is income from work: wages, self employment, farming. Passive is income you didn't do anything to earn. You may have actively earned the money in the account, but not the interest.

Answer by  tamarawilhite (17883)

Yes, you owe federal - and potentially state - income tax on interest income paid to you. This is taxable income as interest income. This rate is different than the income tax level on salary income, but that tax rate depends on your household income. It will range from 10% to 35%.