Taxable Income

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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.

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BREAKING DOWN '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.

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RELATED FAQS
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    Free online calculators for determining your taxable income are located at Bankrate.com, TaxACT.com and Moneychimp.com. Determining ... Read Full Answer >>
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    Marginal tax rates are higher for higher-income individuals. Accurate information about current tax brackets is needed to ... Read Full Answer >>
  7. How are an employee's fringe benefits taxed?

    Common fringe benefits provide employees total compensation above and beyond stated wages or salaries, and a wide range of ... Read Full Answer >>
  8. What is the difference between gross income and taxable income?

    There are numerous tax terms that are beneficial to know and understand when you are preparing and filing your tax returns. ... Read Full Answer >>
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