Define the term taxable income

1. **Definition of Gross Income** Gross income is the total income earned by an individual or business before any deductions. This includes wages, interest, dividends, and other sources of income. 2. **Adjustments and Deductions** Tax law allows certain adjustments and deductions to be subtracted from gross income. These may include: - Standard deductions - Itemized deductions (such as mortgage interest, charitable contributions, etc.) - Exemptions or adjustments for specific situations 3. **Calculation of Taxable Income** Taxable income is calculated by subtracting these allowable deductions from gross income. Mathematically, it can be expressed as: \[ \text{Taxable Income} = \text{Gross Income} - \text{Deductions} \] 4. **Purpose of Taxable Income** The resulting taxable income is the amount on which income tax is levied by the tax authorities. 5. **Example** If an individual has a gross income of \( G \) and qualifies for deductions amounting to \( D \), then the taxable income \( T \) is: \[ T = G - D \] Thus, taxable income is the portion of your income that remains after subtracting all eligible deductions from your total or gross income and is used to determine how much tax you owe.