Taxable Income
Taxable income is the portion of an individual's or business's income that is subject to income tax. It includes wages, salaries, bonuses, and investment earnings, minus any allowable deductions or exemptions. Essentially, it is the amount on which the government calculates how much tax is owed.
To determine taxable income, taxpayers start with their total income and then subtract deductions, such as standard deductions or itemized deductions. This results in a lower amount that is used to figure out the tax liability, ensuring that not all income is taxed at the same rate.