Are royalties passive income?

February 7th, 2013 → 10:39 am @ // No Comments

From my Facebook page came this question:

Hi Carol…I bought this book several months ago. It is helpful, and perhaps this question is in it…But, are book royalties considered passive income? They don’t count toward social security?



My reply:

Great question.

Book royalties are subject to SS & Medicare taxes. They are considered business income, not passive income.

You use 1040 Schedule C Profit and Loss from Business to report book royalties, not Schedule E Rents and Royalties.

See pp. 105 and 106 in Business Tips and Taxes for Writers.

Do you have a question about taxes for writers?

Drop a comment here, email me, or Like my Facebook page and ask your question there.

Carol Topp, CPA

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