What is not true about taxable income?

Taxable income serves as the foundation for determining an individual's or entity's tax liability, reflecting the income that is subject to taxation after accounting for allowable deductions and exclusions. It is calculated from gross income, which comprises all sources of income, and can be reduced through specific adjustments or deductions outlined by tax laws.

One key aspect of taxable income is that it does not include personal exemptions. Personal exemptions were a standard deduction that taxpayers could claim for themselves and their dependents, but this feature was eliminated starting with the 2018 tax year under the Tax Cuts and Jobs Act. Instead, taxpayers now rely primarily on standard deductions or itemized deductions to reduce their taxable income. Thus, taxable income is essentially the income that has been modified by deductions but does not factor in personal exemptions.

The correct understanding is that taxable income is the post-deduction figure that guides the calculation of tax liability, and it strictly involves gross income adjusted by allowable deductions, not personal exemptions.