What does Taxable Income mean?
Taxable income is the amount of a taxpayer's income used to calculate the tax liability owed to the Internal Revenue Service or state taxing authority. Taxable income is a taxpayer's gross income minus certain allowed expenses, deductions, and exemptions as defined by the Internal Revenue Service.
A taxpayer's taxable income is determined through the filing of a tax return by the individual taxpayer. In calculating taxable income, the taxpayer must follow the rules as defined by the Internal Revenue Service. The Internal Revenue Service provides various forms that a taxpayer must use to determine taxable income and thereby tax liability each tax year.