Taxable Income

Personal Finance

Taxable income is the final dollar amount the IRS actually applies tax brackets to. It's calculated as AGI minus either the standard deduction or itemized deductions, minus the Qualified Business Income deduction (if applicable). For a single filer with $120,000 AGI taking the $15,000 standard deduction, taxable income is $105,000. The brackets apply to that $105K — not to gross or AGI. Most online tax estimators ask for gross income and walk you to taxable income automatically. Understanding the distinction matters because every dollar that reduces taxable income (deduction) is more valuable than tax-bracket-rate × dollar.