Taxable Income
Income subject to tax after all deductions and exemptions.
Taxable income is AGI minus either the standard deduction or itemized deductions, plus any applicable QBI deduction. This is the actual amount on which your tax liability is calculated using the tax rate brackets. Reducing taxable income through legitimate deductions is the primary goal of tax planning.
Formula
Taxable Income = AGI − Standard Deduction (or Itemized Deductions) − QBI DeductionExample
With AGI of $90,000 and a standard deduction of $14,600, taxable income is $75,400—this is the figure used to compute federal tax owed.
Why It Matters for Your Business
Taxable income is the number that directly determines your tax bill, so every dollar you can legitimately reduce it saves you money at your marginal rate.
Related Terms
More Taxes Terms
Adjusted Gross Income
Gross income minus specific deductions like retirement contributions.
Tax Audit
An examination of tax returns by the IRS to verify accuracy.
Capital Gains
Profit from selling an asset for more than its purchase price.
Capital Loss
Loss from selling an asset for less than its purchase price.
Tax Deduction
An expense that reduces taxable income.
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