what are nonpassive income and losses 
nonpassive income and losses constitute any income or losses that cannot be classified as passive nonpassive income includes any active income such as wages business income or investment income nonpassive losses include losses incurred in the active management of a business nonpassive income and losses are usually declarable and deductible in the year incurred understanding nonpassive income and lossesactivities that include the taxpayer s material participation in the effort that result in losses or income may be classified as nonpassive according to the internal revenue service the tests for nonpassive versus passive are rooted in the time spent and actions performed in the pursuit of the revenue the losses or income may qualify as nonpassive if the taxpayer annually and actively participates for more than 500 hours in the business venture that requirement falls to 100 hours if no other partner or co worker puts in more work hours towards the venture than the taxpayer during the year this does not include however serving as a manager of the business if another manager is fulfilling those same duties furthermore owning a business yet putting in work hours only for the sake of claiming material participation might not meet the criteria of the irs for nonpassive there are other types of income that can qualify as nonpassive income derived from investment portfolios can receive this classification that can include dividends proceeds of the sale of investments and interest compensation paid for the destruction or theft of property is considered nonpassive sources of retirement income such as deferred compensation and social security may also be included as nonpassive just as income from these sources must be reported any losses associated with these activities can be deducted from the taxpayer s taxes this also includes general partnerships that have the responsibility to oversee the day to day operations of a business nonpassive losses that general partners face may in turn affect the business they are managing as they may attempt to sell or its assets to address their losses this could in turn lead to the closure of the business examples of nonpassive revenuehere are some specific examples of nonpassive revenue examples of nonpassive losseshere are specific examples of nonpassive losses 