Taxable income

“Personal exemption” redirects here. For the UStaxpayer personal exemption, see Personal exemption(United States).

Taxable income refers to the base upon which an incometax system imposes tax.[1] Generally, it includes someor all items of income and is reduced by expenses andother deductions.[2] The amounts included as income, ex-penses, and other deductions vary by country or system.Many systems provide that some types of income are nottaxable and some expenditures not deductible in comput-ing tax.[3] Some systems base tax on taxable income ofthe current period, and some on prior periods. Taxableincome may refer to the income of any taxpayer, includ-ing individuals and corporations, as well as entities thatthemselves do not pay tax, such as partnerships.[4]

Most systems require that all income realized be includedin taxable income. Some systems provide tax exemptionfor some types of income.[5] Many systems impose taxat different rates for differing types (e.g., capital gains orsalaries) or levels of income (e.g., graduated rates). Inthe United States, gross income includes all income re-alized from whatever source, but excludes particular taxexempt items, such as municipal bond interest. In 2010,the United Kingdom and the United States both providedreduced rates of tax for capital gains and dividends.Most systems and jurisdictions allow business taxpayersto reduce taxable income by cost of goods or other prop-erty sold, as well as deductions for business expenses.[6]Many systems limit some sorts of business deductions.For example, deductions for automobile expenses arelimited in the United Kingdom and United States.Some systems allow tax deductions for certain nonbusi-ness expenses.[7] Such deductions may include personalexpense items, such as a home mortgage interest deduc-tion, and vary widely by jurisdiction. In addition, manysystems only levy taxes on earnings above an incometax threshold, allow deductions for personal allowancesor a minimum deemed amount of personal deductions.The United States Federal system allows a deduction forpersonal exemptions, as well as a minimum standard de-duction in lieu of other personal deductions. Some statesin the United States allow few personal deductions.

1 See also

• Income tax

• Income tax in Canada

• Income tax in Hong Kong

• Income tax in the United Kingdom

• Income tax in the United States

• Taxable wages

2 References[1] Reporting income, Retrieved December 4, 2013

[2] What is taxable income?, January 23, 2012, RetrievedDecember 4, 2013

[3] Allowable Deductions, Retrieved December 4, 2013

[4] Six different federal income tax brackets, Retrieved De-cember 4, 2013

[5] Income tax exempt funds, Retrieved December 4, 2013

[6] Business income, deductions and tax returns, RetrievedDecember 4, 2013

[7] Sec. 1.212-1 Nontrade or nonbusiness expenses, Re-trieved December 4, 2013

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2 3 TEXT AND IMAGE SOURCES, CONTRIBUTORS, AND LICENSES

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