After-Tax Income


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".

BREAKING DOWN '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.

  1. Net Present Value - NPV

    Net Present Value (NPV) is the difference between the present ...
  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 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 – 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

    Tax Breaks For Volunteering

    Your volunteer ventures could earn you some welcome tax deductions, along with the satisfaction of helping others.
  7. Taxes

    Six Ways Your Tax Preparer Knows You’re Lying

    Cheating on your taxes is asking for trouble. You might get away with it, but you’re playing with fire and likely to get burned.
  8. Taxes

    The Purpose Of The W-9 Form

    The W-9 form provides key data your clients need if you're an independent contractor. Just be sure you're not really an employee who should fill out a W-4.
  9. Taxes

    5 States Without Sales Tax

    Learn about the five states that do not charge sales taxes and about other taxes the states levy instead in order to generate revenue.
  10. Personal Finance

    10 Reasons It Is Time to Look for a New Job

    Learn 10 good reasons for switching jobs, such as major life changes, ethical concerns, job description creep and upwards mobility.
  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 ... Read Full Answer >>
  2. Do tax brackets include Social Security?

    A portion of your Social Security benefits may be subject to federal taxation using tax brackets. Your tax bracket is determined ... Read Full Answer >>
  3. Do 401k contributions reduce AGI and/or MAGI?

    Traditional 401(k) contributions effectively reduce both adjusted gross income (AGI) and modified adjusted gross income (MAGI). ... Read Full Answer >>
  4. Are IRS audits random?

    While the U.S. Internal Revenue Service (IRS) conducts some of its tax audits using random selection based on a statistical ... Read Full Answer >>
  5. Does the IRS report to credit bureaus?

    The Internal Revenue Service (IRS) doesn't report overdue tax debt to credit bureaus. Federal law protects the privacy of ... Read Full Answer >>
  6. Does the IRS charge interest on penalties?

    The Internal Revenue Service (IRS) charges interest on any overdue taxes owed, but it does not charge interest on penalties. ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Take A Flier

    The slang term for a decision to invest in highly speculative investments.
  2. Bar Chart

    A style of chart used by some technical analysts, on which, as illustrated below, the top of the vertical line indicates ...
  3. Take A Bath

    A slang term referring to the situation of an investor who has experienced a large loss from an investment or speculative ...
  4. Black Friday

    1. A day of stock market catastrophe. Originally, September 24, 1869, was deemed Black Friday. The crash was sparked by gold ...
  5. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  6. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
Trading Center