Taxable income
From Wikipedia, the free encyclopedia
Taxable income is the portion of income that is the subject of taxation according to the laws that determine what is income and the taxation rate for that income. Generally, taxable income refers to an individual's (or corporation's) liabilty on their earnings adjusted for what is regarded as taxable or not by government statute. The main questions put by most individuals in any jurisdiction are "what makes up my taxable income" and what tax rates should be applied such that I can work out my tax liabilty to the state. For example, suppose within a year, one person earned $100,000 from work, made $50,000 profit from selling stock, and won the lottery for $1,000,000. This person has, prima facie, an income of $1,150,000. However, some of this income may be taxed at a lower rate, or perhaps not taxable at all. In most western countries, 100% of regular salary (above a certain threshold) is taxable, a portion of Capital Gain (ie profit from selling stock or real estate) is taxable, and lottery or win fall gain may not be taxable at all.
[edit] Taxable income in the United States
In the United States, taxable income is defined in Internal Revenue Code 63 as Adjusted Gross Income minus the Standard deduction (or the Itemized deduction) minus the deduction for personal exemptions.
Taxable income = Adjusted Gross Income - Standard deduction (or Itemized deduction) - Personal exemptions.
