Taxable Income

AAA

DEFINITION of 'Taxable Income'

The amount of income that is used to calculate an individual's or a company's income tax due. Taxable income is generally described as gross income or adjusted gross income minus any deductions, exemptions or other adjustments that are allowable in that tax year.

Taxable income is also generated from appreciated assets that have been sold or capitalized during the year and from dividends and interest income. Income from these sources is generally taxed at a different rate and calculated separately by the tax entity.

INVESTOPEDIA EXPLAINS 'Taxable Income'

Individuals may choose to use a standard deduction amount for a given tax year. This amount is subtracted from gross income to arrive at the final taxable income figure. If individual deductions are claimed, the person or company will hope to have a total amount deducted from gross income lower than what would be achieved using the standard deduction. Some typical deductions that lower many tax bills include IRA contributions and certain business expenses.

RELATED TERMS
  1. Expatriate

    An individual living in a country other than their country of ...
  2. Worldwide Income

    The aggregation of a taxpayer's domestic and foreign income. ...
  3. Active Income

    Income for which services have been performed. This includes ...
  4. Adjusted Gross Income - AGI

    A measure of income used to determine how much of your income ...
  5. Exempt Income

    Certain types or amounts of income not subject to federal income ...
  6. Income Shifting

    A strategy of moving a person's income from a high income bracket ...
Related Articles
  1. Will I pay taxes on my Social Security ...
    Retirement

    Will I pay taxes on my Social Security ...

  2. Minimize Taxes With Asset Location
    Taxes

    Minimize Taxes With Asset Location

  3. What is the
    Savings

    What is the "stretch IRA" concept?

  4. What was the Mahonia company and why ...
    Investing

    What was the Mahonia company and why ...

comments powered by Disqus
Hot Definitions
  1. Harvest Strategy

    A strategy in which investment in a particular line of business is reduced or eliminated because the revenue brought in by ...
  2. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  3. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The ...
  4. Pareto Principle

    A principle, named after economist Vilfredo Pareto, that specifies an unequal relationship between inputs and outputs. The ...
  5. Budget Deficit

    A status of financial health in which expenditures exceed revenue. The term "budget deficit" is most commonly used to refer ...
  6. Floating Exchange Rate

    A country's exchange rate regime where its currency is set by the foreign-exchange market through supply and demand for that ...
Trading Center