What Is Taxable Income?

Taxable income is the portion of your earnings that the IRS actually taxes — it's your total income minus any deductions you're allowed to take. It starts with wages, freelance income, investments, and other earnings. Then you subtract deductions to arrive at the number that determines your tax bill. Lower taxable income means lower taxes, which is why deductions matter. Your tax bracket is based on your taxable income, not your gross pay.