Definition of 'Taxable Income'
Taxable income is the amount of income that is subject to tax. It is calculated by subtracting certain deductions and exemptions from your gross income. Your gross income is all of your income from all sources, including wages, salaries, tips, interest, dividends, capital gains, and other sources.
There are a number of deductions that you can claim to reduce your taxable income. These include:
* The standard deduction
* Itemized deductions, such as medical expenses, mortgage interest, and charitable contributions
* Personal exemptions for yourself, your spouse, and your dependents
There are also a number of exemptions that you can claim to reduce your taxable income. These include:
* The earned income credit
* The child tax credit
* The dependent care credit
* The American opportunity credit
Once you have calculated your taxable income, you will need to determine your tax liability. Your tax liability is the amount of tax that you owe to the government. Your tax liability is calculated by multiplying your taxable income by the appropriate tax rate.
There are a number of factors that can affect your tax liability, including your filing status, your income, and your deductions and exemptions. If you have any questions about your taxable income or your tax liability, you should consult with a tax professional.
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