Which of the following best describes active income?

Active income refers to the earnings that an individual receives for services rendered, which typically includes wages, salaries, tips, commissions, and income from self-employment. This type of income is generated from the effort that a taxpayer puts in, such as working a job or running a business.

In contrast, income from stocks and dividends represents investment income rather than income earned through active participation. Similarly, income derived from passive investments or rental activities falls under passive income, which is typically characterized by earnings that do not require active involvement or effort from the individual.

Therefore, the defining quality of active income is that it comes directly from the work performed by the taxpayer, distinguishing it clearly from other types of income associated with passive activities or investments.