Kiyosaki splits income into three types in new post
Robert Kiyosaki says earned, portfolio and passive income separate rich from poor, but his tax claims depend on how income is produced, Bitcoin.com News reports.
Key points
- Kiyosaki posted the three-category framework on X on Sept. 23.
- He links earned income to wages and portfolio income to investments held by middle-class savers.
- He describes passive income as money received without working.
- The IRS treats interest, dividends and investment gains as portfolio income under passive activity rules.
- Kiyosaki has previously said he would put bitcoin sale proceeds into surgery centres and a billboard business.
Robert Kiyosaki, author of Rich Dad Poor Dad, has set out a three-part framework for income in a Sept. 23 post on X, according to Bitcoin.com News. He divides income into earned, portfolio and passive categories, and uses them to describe what he sees as a dividing line between poor, middle-class and rich people.
Kiyosaki associates earned income with wages from a job. He links portfolio income to the investments held by many middle-class savers, including retirement accounts such as 401(k)s and individual retirement accounts. Passive income, in his description, is money that comes in without working.
Three income categories
The labels support his broader argument that learning the language of money can change how people think about work and wealth. He told readers to study and learn the words of money, adding that words are free. His mention of retirement accounts follows earlier remarks in which he questioned stock-heavy retirement plans.
Bitcoin.com News notes that a retirement account is a way to hold investments rather than a separate type of income. The tax treatment of the three categories also depends on the activity involved and the taxpayer's circumstances, so the framework does not map onto a single rate.
Where tax claims need care
Under IRS passive activity rules, a passive activity generally means a business in which the taxpayer does not materially participate, or a rental activity. The IRS generally treats interest, dividends and gains on investments as portfolio income for those rules, even when the investor does no day-to-day work.
Investment income and income from passive activities can be taxable, and some higher-income taxpayers may owe an additional tax on net investment income. Kiyosaki's statement that passive income is often taxed at zero reflects his view rather than a general US tax rule, the report says.
Property and crypto income
Retirement distributions add a further distinction. Money withdrawn from a traditional 401(k) is generally taxable unless it is rolled over, while qualified Roth distributions can receive different treatment. Kiyosaki has long tied his preference for income-producing property to the ideas in his books, and has described real estate financed with debt as part of his strategy.
He made a similar distinction between holding an asset and seeking recurring cash flow last November, when he described a bitcoin sale and plans to put the proceeds into surgery centres and a billboard business. The report adds that receiving tokens as compensation or rewards and realising a gain on a sale can trigger different tax treatment, so the name of an asset alone cannot decide which category applies.