Taxable Income

The term taxable income is used in two different senses. The first sense is simply an informal way of saying or asking whether a particular item is subject to tax. E.g., “Salaries constitute taxable income.” Or, “Are pension payments taxable?”


The second sense is more technical, referring to the amount that the tax rate schedule (or tax table) applies to.


To figure taxable income in the technical sense, start with gross income, which is the sum of all your income before any adjustments or deductions.1 Then subtract all your allowable deductions from gross income. The result is your taxable income.2



1           IRC Section 61(a).

2           IRC Section 63(a).