Taxable Income

Taxable income is the amount of income that is actually subject to taxation, after all personal exemptions and deductions are factored in. For freelancers, this would be their total income, minus any business expenses and relevant deductions.

What is taxable income?

Taxable income is the portion of your income that is subject to taxation by the government. It includes all types of income, such as wages, salaries, tips, bonuses, interest, dividends, capital gains, and business income, minus any deductions or exemptions you are eligible for.

For example, if you earned $50,000 in wages and had $5,000 in deductions, your taxable income would be $45,000.

How is taxable income calculated?

Taxable income is calculated by subtracting all allowable deductions and exemptions from your total income. The resulting amount is your taxable income, which is used to determine your tax liability.

Some common deductions and exemptions include the standard deduction, itemized deductions, personal exemptions, and dependent exemptions.

What is the difference between gross income and taxable income?

Gross income is the total amount of income you earned during the year, including all wages, salaries, tips, bonuses, interest, dividends, capital gains, and business income. Taxable income, on the other hand, is the portion of your gross income that is subject to taxation after all allowable deductions and exemptions have been taken into account.

For example, if you earned $50,000 in gross income and had $5,000 in deductions, your taxable income would be $45,000.

What are some common deductions and exemptions that can reduce taxable income?

Some common deductions and exemptions that can reduce taxable income include the standard deduction, itemized deductions, personal exemptions, and dependent exemptions. The standard deduction is a fixed amount that is subtracted from your gross income to arrive at your taxable income. Itemized deductions are specific expenses that you can deduct from your gross income, such as mortgage interest, property taxes, and charitable contributions. Personal exemptions are deductions for yourself and your spouse, while dependent exemptions are deductions for each of your dependents.

What is Workmade?

WorkMade is an all-in-one banking and accounting app designed specifically for freelancers! WorkMade gives you access to: zero-fee business banking, automated bookkeeping, fast and easy invoicing, and quarterly tax estimations and payments.

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