Dividends

• When you own stock, you will often receive dividends when those companies earn money. These dividends are considered portfolio income.
  
  

Capital Gains

• Another form of portfolio income is capital gains, money earned through the sale of an asset such as an investment property, shares of stock and mutual funds.
  
  

Interest

• Lending money to borrowers through savings accounts, certificates of deposit and peer lending all gain interest, which is portfolio income.
  
  

Royalties

• The last major category of portfolio income is royalties, typically earned through owning property such as a copyrighted material or franchise.
  
  

Taxes

• Portfolio income must be reported to the Internal Revenue Service (IRS) and is taxed as active income, just like wages in a job. It cannot be deducted to offset losses in passive income because the only types of income the IRS considers to be passive are "rental activity or a business in which the taxpayer does not materially participate" into which category portfolio income does not fall.