Taxable Income

Taxable Income refers to the portion of an individual’s or entity’s income that is subject to taxation by the government. It is calculated as Gross Income minus any allowable deductions, exemptions, and non-taxable income. Taxable income includes wages, salaries, bonuses, rental income, and interest income, among others.

Examples:

• If a person earns $50,000 in wages and has $5,000 in deductions (like student loan interest), their taxable income would be $45,000.
• A Corporation with $1,000,000 in Revenue and $300,000 in deductible business expenses would have a taxable income of $700,000.

Cases:

• In Case A, an individual receives $70,000 in salary and $10,000 in Capital gains. After deducting $15,000 in mortgage interest and $5,000 in retirement contributions, their taxable income is $60,000.
• In Case B, a business generates $500,000 in sales and incurs $200,000 in expenses. After considering $50,000 in Depreciation, the taxable income would be $250,000.