My wife and I are slightly behind on getting our taxes done this year. The good news is that I should be finishing them up this week. One of the things that interested me this year when getting my tax paperwork together was our 1099 forms (for tracking interest, dividend, and other income).

The interest and dividend payments were the only 1099s that were applicable to my wife and I. When I tallied up the total of how much money my wife and I earned in 2007 from interest and dividends, it surprised me - the total was just over $4,100! I couldn’t believe we earned over $4,100 without working - that is well over $300 per month!

How we earned $4,100 without working

Well, I won’t break down the specific numbers, but I will tell you the types of income. I will also make a note that interest rates last year were very good for increasing your earned interest income!

Last year our $4,100 came from:

• Earned interest from bank accounts and Money Market Accounts
• Dividend income
• Bank account and referral bonuses
• Credit card rebates

Earned interest. Earned interest from bank accounts and money market accounts is self explanatory, so I won’t go into any details there. Just note that the rates this year are 30-40% lower than this time last year, so I don’t expect those numbers to be the same.

Dividend income. As for dividend income, my wife and I do not hold any stocks in individual companies, although I have thought about investing in dividend paying stocks in the future. For now, we are investing solely in index funds, which is where our dividends came from.

Bank account and referral bonuses. First, it is important to note that these count as earned interest for tax purposes. Last year, I took advantage of several bank bonuses which I received for joining a new bank or opening a certain account. The highest of these was $150, but I opened several other accounts with varying bonuses.

Perhaps the most well-known bank bonus is the $25 ING bank bonus. New members who sign up with a minimum of $250 get a $25 bonus. If you refer someone who signs up, they get $25, and you also get $10. Do you see where I’m going with this? Repeat this process a few times, and you can make some very nice money.

Credit card bonuses. I also took advantage of a couple credit card offers for free money. This includes signing up for new cards for the bonuses and receiving cash back bonuses and rebates. The good news is that most bonus money you earn by signing up for credit cards is considered a rebate, which is not taxable! Be sure to check with a tax professional for the exact situation though!

How much can you earn by doing this?

A lot! My $4,100 was a mixture of interest income from cash on hand, dividend payments, and bank and credit card referrals and bonuses. While that seems like a lot, and it is, it is by no means the upper limit. There are a lot of regular folks who are able to take advantage of similar deals and situations to get a lot of free money. Here are two examples:

$5,000 - Rocketc, the blogger at Rocket Finance, just wrote a three part series about doing referral bonuses to earn income to make up for a budgeting shortfall. He was able to earn over $5,000 without working over the course of a year!

$11,500 - Madison, from My Dollar Plan, has over $200,000 in credit card debt that she uses to fund high interest savings accounts and make other strategic financial moves. The money is from 0% balance transfers, so she pays no interest as long as she makes the minimum payments on time, and pays the bill in full when it is due. She estimates doing this combined for earnings and savings of over $11,500 last year!

I am trying to increase my passive income next year

It might be tough to repeat these same numbers this year because the fed has drastically lowered the interest rates. However, I am doing a few other things to try and increase my passive income for next year. Hopefully a few of them will work well!

Anyone can get these types of bonuses. Here are a few ways to earn some free money with bank bonuses and referrals. It is easy for just about anyone to get over $100-200 in free referral money from that page. So go earn a few hundred dollars!

Note: I may be a little loose with my definition of passive income - many people consider earned interest and dividends as portfolio income. Still, $4,100 without working is exciting to me and I want to do this every year!

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