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. Adjusted Gross Income - AGI

    A measure of income used to determine how much of your income ...
  4. Income Shifting

    A strategy of moving a person's income from a high income bracket ...
  5. Active Income

    Income for which services have been performed. This includes ...
  6. Exempt Income

    Certain types or amounts of income not subject to federal income ...
RELATED FAQS
  1. What is the highest marginal tax rate in the United States?

    In a marginal tax rate system, such as the one found in the United States, the more income one makes, the more one is expected ... Read Full Answer >>
  2. Can you calculate the marginal tax rate in Excel?

    Marginal tax rates are higher for higher-income individuals. Accurate information about current tax brackets is needed to ... Read Full Answer >>
  3. 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 >>
  4. 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 >>
  5. What are the penalties for early withdrawal from a Registered Retirement Savings ...

    Withdrawing from your Registered Retirement Savings Plan (RRSP) before retirement carries several penalties. Penalties for ... Read Full Answer >>
  6. What was the Mahonia company and why did it become the subject of a lawsuit?

    In 1992, J.P.Morgan went into the energy trading business by creating a venture company called Mahonia Limited. At least, ... Read Full Answer >>
  7. Will I pay taxes on my Social Security payouts?

    Some people have to pay federal income taxes on the Social Security benefit they receive. Typically, this occurs only when ... Read Full Answer >>
  8. What is the "stretch IRA" concept?

    The "stretch IRA" is not a new IRA account on the market, or even a new investment concept, it is simply a wealth transfer ... Read Full Answer >>
  9. Should I put money into a retirement account even if it isn't tax deductible?

    One of the biggest and most often-touted advantages of putting money into a retirement account is the tax savings that come ... Read Full Answer >>
Related Articles
  1. Taxes

    Minimize Taxes With Asset Location

    Learn how to maximize your investment returns with this tax-minimization strategy.
  2. Taxes

    Understanding Income Tax

    Income tax is a levy many governments place on revenue of entities within their jurisdiction.
  3. Economics

    What is a Tax Liability?

    Tax liability is the amount of money a person or entity owes to the government as the result of a taxable event.
  4. Taxes

    Top 4 Ways to Invest Tax Free

    When you're ready to invest, start by looking at these 4 tax-advantaged ways to build your portfolio and your future.
  5. Taxes

    Missed The Tax Return Deadline? Here's What To Do

    Most important: Do it now.
  6. Taxes

    Are Taxes the Solution for Income Inequality?

    Income inequality continues to increase. Why? And are taxes the solution?
  7. Retirement

    Some Tax Considerations For Your Retirement Income

    Even if you don’t plan to retire, it’s still a good idea to think ahead about where to live, your income and how it all interacts with Social Security.
  8. Taxes

    What is Withholding Tax?

    Withholding tax is the income tax federal and state governments require employers to withhold from employee paychecks.
  9. Taxes

    OK, So I'll Be Smarter Next Tax Time

    5 tax resolutions to start on right now for a smoother tax return next April 15.
  10. Taxes

    What To Do If You Lost Your W-2

    There's no need to panic if you don't have your Form W-2 to file taxes, there are easy ways to gain access to the missing form or file without it.

You May Also Like

Hot Definitions
  1. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  2. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
  3. Variance

    The spread between numbers in a data set, measuring Variance is calculated by taking the differences between each number ...
  4. Terminal Value - TV

    The value of a bond at maturity, or of an asset at a specified, future valuation date, taking into account factors such as ...
  5. Rule Of 70

    A way to estimate the number of years it takes for a certain variable to double. The rule of 70 states that in order to estimate ...
  6. Risk Premium

    The return in excess of the risk-free rate of return that an investment is expected to yield. An asset's risk premium is ...
Trading Center