What is considered taxable income?

Taxable income is defined as the amount of income that is used to determine an individual or entity's tax liability. It is calculated after accounting for various deductions, exemptions, and credits that are allowed under tax law. Essentially, taxable income includes all sources of income that are subject to taxation minus any allowable deductions, which can include expenses like mortgage interest, medical expenses, and state and local taxes.

This definition is crucial because it directly affects how much tax one owes. The taxable income serves as the base upon which the tax rate is applied to calculate the total tax due. It is important to distinguish taxable income from gross income, which is the total income before any deductions, as well as other terms like adjusted gross income, which may include certain adjustments but not necessarily the deductions that would lead to the final figure for taxable income.

The other descriptions do not accurately capture the complete picture of taxable income. The total gross income would not account for any deductions or exemptions, which are critical for determining what actually gets taxed. Similarly, the income after excluding personal exemptions may refer to adjusted gross income but does not reflect how final tax liability is calculated. Finally, income received from non-taxable accounts would not contribute to taxable income at all, as it is specifically classified