Taxable income is the amount of income that is subject to income tax, after all allowable deductions and exemptions have been taken into account.
Once deductions & exemptions have been accounted for, the remaining amount is considered taxable income, and the amount of tax owed is calculated based on the applicable tax rates & tax brackets.
Taxable income includes all types of income, such as wages, salaries, tips, bonuses, business income, investment income, dividend income, rental income, and capital gains.
Exemptions and deductions indirectly reduce the amount of taxes a filer owes by reducing his or her “taxable income,” which is the amount of income on which a filer pays taxes.
To lower your taxable income, you can Contribute to retirement accounts, Claim deductions, Take advantage of tax credits, Maximize your healthcare spending, Consider tax-loss harvesting.