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A company rents equipment from me that I own. Does this income get taxed as passive income, in the same way that real property does? I've scoured the IRS tax code and have yet to find clarity.

It is my preference that I can classify this as 1099 income, and be able to contribute this to my self-directed retirement account.

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The IRS states:

Cash or the fair market value of property or services you receive for the use of real estate or personal property is taxable to you as rental income. In general, you can deduct expenses of renting property from your rental income.

Pub 590A states:

What Isn’t Compensation?

Compensation doesn’t include any of the following items.

  • Earnings and profits from property, such as rental income, interest income, and dividend income.

  • Pension or annuity income.

  • Deferred compensation received (compensation payments postponed from a past year).

  • Income from a partnership for which you don’t provide services that are a material income-producing factor.

  • Conservation Reserve Program (CRP) payments reported on Schedule SE (Form 1040), line 1b.

  • Any amounts (other than combat pay) you exclude from income, such as foreign earned income and housing costs.

Chapter 2 of the document makes it clear that that limitation also applies to Roth IRAs. Given that, it appears you cannot contribute the money you're receiving from the company renting equipment to you to a Traditional or Roth IRA.

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    Note some noncompensation income (relevantly including some rents and royalties) is reported on 1099 (-MISC or possibly other), and some income not reported on a particular or any 1099 is still compensation. It is the substance that matters, not the form (in both senses of the word).
    – dave_thompson_085
    Commented Jun 9, 2018 at 0:13

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