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. Income Tax

    A tax that governments impose on financial income generated by ...
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. Professionals

    What Accounts for One-Third of the Wage Gap

    Women who work full time still make less than men who have the same qualifications. One third of the pay gap may be due to gender bias and discrimination.
  7. Taxes

    Here's How to Deduct Your Stock Losses From Your Tax Bill

    Learn the proper procedure for deducting stock investing losses, and get some tips on how to strategically take losses to lower your income tax bill.
  8. Taxes

    The 5 Countries Without Income Taxes

    Discover information on some of the best countries to consider relocating to that offer the financial benefit of charging no income tax.
  9. Fundamental Analysis

    7 Ways to Create a Tax-Efficient Portfolio

    Taxes may be a necessary evil, but that doesn't mean they can't be reduced. Here's a host of smart moves today's investors can make.
  10. Economics

    Explaining Fair Market Value

    Fair market value is the price at which a buyer and seller are willing to exchange a good.
  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. Are Cafeteria plans taxable?

    Whether the benefits you receive through your employer-sponsored cafeteria plan are taxable depends entirely on which benefits ... Read Full Answer >>
  3. Does working capital include salaries?

    A company accrues unpaid salaries on its balance sheet as part of accounts payable, which is a current liability account, ... Read Full Answer >>
  4. Why is Panama considered a tax haven?

    The Republic of Panama is considered one of the most well-established pure tax havens in the Caribbean due to extensive legislation ... Read Full Answer >>
  5. Do financial advisors prepare tax returns for clients?

    Financial advisors engage in a wide variety of financial areas, including tax return preparation and tax planning for their ... Read Full Answer >>
  6. How are variable annuities taxed at death?

    If the owner of a variable annuity dies before receiving full payment, his beneficiary must pay taxes on any earnings received. ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Real Estate Investment Trust - REIT

    A REIT is a type of security that invests in real estate through property or mortgages and often trades on major exchanges ...
  2. Section 1231 Property

    A tax term relating to depreciable business property that has been held for over a year. Section 1231 property includes buildings, ...
  3. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
  4. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  5. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  6. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!