Passive income is the talk of the town. If you look on YouTube there are countless amounts of videos talking about it, and how it can change your life.
The basic idea behind passive income is that you find a way to make money without having to actively work for it. This could be anything from investing in stocks or real estate to creating an online course or writing a book.
So, what about royalties? Are they considered passive income? In this blog post, we will go over everything you need to know about royalties and whether or not they can be considered passive income.
What Exactly Is Royalty Income?
Royalty income is defined as payments made to someone for the use of their property, such as patents, copyrights, or natural resources. This income is typically received in the form of royalties, which are periodic payments that are generally based on a percentage of sales.
For example, if you own a patent for a new type of widget, you would receive royalty payments every time someone sells a widget that uses your patent.
Similarly, if you own the copyright to a popular book, you would receive royalties every time the book is sold.
The last and most common example is music! When a song is played on the radio, streamed online, or used in a movie or TV show, the artists who created that song will receive royalties.
Answer To The Question Is Royalty Income Considered Passive Income:
If you have a YouTube channel and create a video, and that video three years later still gets 3000 views a month, you’re still making money from that video without having to do anything else. You’ve generated passive income.
The same can be said for royalties. If you create something once and it continues to generate income for you without you having to do any additional work, then it is considered passive income. For example, if you make a song and it gets played on the radio, you’re not doing any additional work to generate that income, so it is considered passive income.
Also, royalty income is officially considered passive income by the IRS, so there’s your concrete answer!
Now that we’ve answered the question, “is royalty income considered passive income,” you might be wondering how you can start generating royalties yourself. Here are a few ideas:
Invest In Royalty Income
Believe it or not, you can invest in royalty income! There are a few different ways to do this, but the most common is through a company called Royalty Exchange.
Royalty Exchange is a marketplace where people can buy and sell royalties. This is a great way to get started with passive income because it allows you to invest without having to create anything yourself.
On Royalty Exchange you can filter out songs that are worth hundreds of thousands to millions of dollars in royalties, and then invest in the ones you like.
The most challenging part about Royalty Exchange is that it’s very competitive, and the best royalties are often scooped up quickly. So, if you’re interested in this route, it’s important to act fast!
Publish Books On Amazon KDP
If you’re a writer, another great way to generate passive income is to publish your books on Amazon. When you do this, you will earn royalties every time someone buys your book.
The best part is that once your book is published, it can continue to generate income for years and years without you having to do any additional work. The percentage that you can keep is 60% of the price you set for your book.
Patent Royalties
If you have a great idea for a new product, you can patent it and then receive royalties every time someone sells that product. This is a great way to generate passive income, but it does require a bit of an upfront investment to get the patent.
The good news is that once you have the patent, you can receive royalties for the life of the patent, which is 20 years.
Royalty Trusts
A royalty trust is a type of investment that holds natural resources, such as oil, gas, or minerals. The trust then pays out the royalties it earns to the investors.
This is a great way to get started with passive income because it allows you to invest in an asset that will generate income for years to come without you having to do any work.
Television and Film-Making Royalties
If you create a television show or movie, you can earn royalties every time it is aired. This is a great way to generate passive income because you only have to create the show or movie once, and then you can continue to earn money from it for years.
The percentage that you earn depends on the contract that you have with the network or studio. You can do this with commercials, too!
Other Frequently Asked Questions
How do royalties differ from other forms of passive income?
Royalties are payments made to someone for the use of their intellectual property, such as a patent, copyright, or trademark. These payments are typically made periodically, such as monthly or quarterly.
Other forms of passive income, such as dividends from stocks or rental income from property, are not considered royalties.
How can you ensure your royalty payments are considered passive income for tax purposes?
You would have to speak to a professional about your specific case, but for royalty payments to be considered passive income, you cannot be actively involved in the business that is generating the royalties.
There are some tax benefits to getting it classified as passive income since you won’t have to pay medicare and social security taxes on it. But as I stated above, make sure to speak to a professional about your specific case before making any decisions.
Conclusion
There you have it! These are just a few of the ways that you can generate passive income through royalties.
If you’re looking for a great way to generate income without having to do any additional work, then consider investing in royalty income. It’s a great way to make money while you sleep!
If you found this blog post helpful, please consider sharing it with your friends and family! Thank you for reading.
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