Taxable Income
Income that's actually taxed after subtracting deductions from AGI. Used to determine tax bracket and total tax owed.
What You Need to Know
Taxable income is what you actually pay taxes on after all deductions. Start with Adjusted Gross Income (AGI), subtract standard or itemized deductions, and the result is taxable income.
For 2024: $100,000 AGI - $14,600 standard deduction = $85,400 taxable income. This $85,400 determines your tax bracket and calculates your total federal tax.
The process: Gross Income → AGI (minus above-the-line deductions) → Taxable Income (minus standard/itemized deductions) → Tax Owed (apply brackets).
Lower taxable income = lower taxes. Maximize pre-tax 401k contributions, HSA deposits, and deductions to reduce this number. Every $1,000 reduction saves $120-370 depending on your tax bracket.
Sources & References
This information is sourced from authoritative government and academic institutions:
- irs.gov
https://www.irs.gov/publications/p17
Related Calculators & Tools
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Related Terms in Taxes
Active Income
Active income is earnings from work, crucial for meeting immediate expenses and building wealth.
Discretionary Income
Discretionary income is the money left after essential expenses, crucial for saving and investing.
Earned Income
Earned income is money received from working, crucial for tax calculations and financial stability.
Effective Tax Rate
Your actual tax rate—total taxes paid divided by total income. Lower than marginal rate because of brackets and deductions.
Estate Tax
A tax on the transfer of assets after death, impacting wealth distribution and inheritance.
Estimated Taxes
Estimated taxes are prepayments of income tax owed, helping you avoid penalties and manage cash flow.