After-Tax Income

AAA

DEFINITION of 'After-Tax Income'

The amount of money that an individual or company has left over after all federal, state and withholding taxes have been deducted from taxable income. After-tax income represents the amount of disposable income that a consumer or firm has to spend on future investments or on present consumption.

Also known as "income after taxes".

INVESTOPEDIA EXPLAINS 'After-Tax Income'

When analyzing or forecasting personal or corporate cash flows, it is important to use an estimated after-tax net cash flow. This is a more appropriate measure because after-tax cash flows are what the entity has available for consumption.

This is not to say that all investments are purchased with after tax income; some companies offer salary deferral retirement plans that deduct money on a pretax basis. The money will be taxed once the employee decides to withdraw the amount (such as for retirement). However, because most people have less income during their retirement years compared to their prime earning years, the amount of tax paid will be less.

RELATED TERMS
  1. Net Present Value - NPV

    The difference between the present value of cash inflows and ...
  2. Pay As You Earn - PAYE

    A system of income tax withholding that requires employers to ...
  3. Pretax Profit Margin

    A company's earnings before tax as a percentage of total sales ...
  4. Pretax Earnings

    A company's earnings after all operating expenses, including ...
  5. Solidarity Tax

    A government-imposed tax levied in an attempt to provide funding ...
  6. Withholding Tax

    1. Income tax withheld from employees' wages and paid directly ...
RELATED FAQS
  1. I sold my house. Can I exclude the gain from my income?

    Generally, you are required to include the gain from the sale of your home in your taxable income. However, if the gain is ...
Related Articles
  1. Taxes

    Before You Visit Your Tax Preparer: Do This

    The earlier you start preparing your tax records and documents, the more likely you are to have a smooth tax return experience โ€“ and all the tax benefits you're due.
  2. Insurance

    Save Money The Scottish Way

    Take a trip through history to learn from some (in)famously frugal Scots.
  3. Retirement

    Avoiding Too Much Tax On Your Distributions

    IRA assets can't be taxed twice - find out how to avoid paying the second time around.
  4. Taxes

    When You Should Change Your Withholding Tax

    When there are major changes in your life, you should adjust your withholding to ensure you aren't paying too much in taxes.
  5. Retirement

    Cut Your Tax Bill

    Paying your bills early or giving an extra donation now can help you come tax time.
  6. Taxes

    Taxes: H&R Block Vs. TurboTax Vs. Jackson Hewitt

    There are more and more tax services to help ease the pain of filing income taxes. Here's our take on three of the biggest.
  7. Taxes

    The Best Free Tax-Prep Software For April 15, 2015

    Filing state taxes online costs money, but many platforms let you file simple federal returns free. Some support more complex filings; others import data.
  8. Taxes

    5 Smart Uses For Your Tax Refund

    Consider using the bulk of your refund to take care of long-term needs, like saving for retirement or college.
  9. Taxes

    Top 10 Tax Filing Mistakes โ€“ And How To Avoid Them

    What are the worst tax filing mistakes people make? Tax expert and attorney Barbara E. Weltman points out 10 common ones โ€“ and how to steer clear of them.
  10. Entrepreneurship

    10 Tax Benefits For The Self-Employed

    Running your own business has both personal and financial perks.

You May Also Like

Hot Definitions
  1. Sunk Cost

    A cost that has already been incurred and thus cannot be recovered. A sunk cost differs from other, future costs that a business ...
  2. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  3. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  4. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
  5. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
  6. Law Of Supply

    A microeconomic law stating that, all other factors being equal, as the price of a good or service increases, the quantity ...
Trading Center