taxable income
Taxable income is the amount of income subject to tax after subtracting all allowable deductions from an individual’s or business’s gross income. In U.S. tax law, taxable income is calculated by taking adjusted gross income (AGI) and then subtracting either the standard deduction or itemized deductions, along with any other deductions permitted by law. AGI is not the same as taxable income; it is an intermediate figure used in the calculation. After taxable income is determined, a taxpayer may still apply exemptions or tax credits to reduce the total tax owed.
[Last reviewed in August of 2025 by the Wex Definitions Team]
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