Gross Income - Above the Line Deductions = Adjusted Gross Income - (Deductions +Exemptions)= Taxable Income
You don't pay tax on the tax-free pay and you do pay tax on taxable income
Gross income is the raw income earned while net income is after deductions of interest taxes while taxable income is that income on which tax is calculated.
Adjusted gross income
Taxable income is described as gross income or adjusted gross income minus any deductions or exemptions. Taxable income can also come from appreciated assets that have been sold or capitalized in that tax year.
AGI (Adjusted Gross Income) is the total income you earn in a year minus certain deductions. MAGI (Modified Adjusted Gross Income) is AGI with certain additional adjustments. Taxable income is the amount of income that is subject to taxation after deductions and adjustments.
Above the line deductions are subtracted from a person's gross income to calculate adjusted gross income, while below the line deductions are subtracted from adjusted gross income to determine taxable income.
You pay tax on taxable income and you don't on tax free income
Gross Income - Above the Line Deductions = Adjusted Gross Income - (Deductions +Exemptions)= Taxable Income
Gross Income - Above the Line Deductions = Adjusted Gross Income - (Deductions +Exemptions)= Taxable Income
There is some difference in financial statement income as well as taxable income as in financial statement income there are items which are not allowed by tax authorities and main item is depreciation. Other factors are that tax is deducted on income which is received while in financial statement income included revenue which is not received or accrual items that needs to be adjusted as well that's why financial statement income and taxable income is not same.
You don't pay tax on the tax-free pay and you do pay tax on taxable income
Gross income is the raw income earned while net income is after deductions of interest taxes while taxable income is that income on which tax is calculated.
Adjusted gross income is calculated before the standard deduction is applied. The standard deduction is then subtracted from the adjusted gross income to determine the taxable income.
Adjusted gross income
Taxable income is described as gross income or adjusted gross income minus any deductions or exemptions. Taxable income can also come from appreciated assets that have been sold or capitalized in that tax year.
The income tax act focuses its concern on total income and the income tax rule focuses on which types of income are taxable. That is the biggest difference between the two.